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Coinbase Gets Support from Allies in SEC Court Case

Published March 20, 2024 11:43 AM
James Morales
Published March 20, 2024 11:43 AM
By James Morales
Verified by Peter Henn

Key Takeaways

  • Coinbase has challenged the SEC in court, hoping to force it to issue new regulations for the crypto sector.
  • Paradigm and the Crypto Council for Innovation have filed amicus briefs in support of Coinbase.
  • Industry have warned that the SEC’s stance risks driving crypto innovation overseas.

Coinbase’s legal challenge, aimed at forcing the Securities and Exchange Commission  (SEC) to issue new rules for the US crypto sector, has received a boost in the form of two amicus briefs filed by industry representatives.

On Monday, March 18, the Crypto Council for Innovation (CCI) and Paradigm submitted statements in support of Coinbase. This, therefore, could well demonstrate the industry’s desire for a fresh approach from the SEC.

Crypto Assets Are “Fundamentally Different” From Securities

In its brief, Paradigm argued that cryptocurrencies are “fundamentally different” from securities.

It saidL “The current SEC disclosure framework—developed in the 1930s and designed to regulate securities issued by centralized companies for fundraising—makes no sense when applied to crypto assets.”

Unlike traditional securities, Paradigm pointed out many crypto tokens don’t rely on an issuer for value or continued existence. The brief added: “The SEC’s current framework demands the disclosure of information irrelevant to crypto assets while ignoring relevant information.”

Monday’s court filing is the second amicus brief Paradigm has submitted in support of Coinbase.

Last year, the company teamed up with fellow venture capital investor Andreessen Horowitz to file a brief  in the SEC’s lawsuit accusing Coinbase of operating an unregistered securities exchange.

CCI Argues Current System Risks Pushing Crypto Industry Offshore

As an alliance of industry participants,  the Crypto Council for Innovation represents a broad range of perspectives spanning various digital asset holders, developers, operators, and investors.

Alongside businesses like Coinbase and Paradigm, CCI members include several non-profit foundations representing the Solana, Near and Filecoin ecosystems. 

Appealing to the SEC’s duty to facilitate capital formation, the CCI filing states:

“Unless these stakeholders can rely on clear, consistent guidance—and work within a regulatory framework that makes compliance possible—digital assets (and the growing industry they fuel) will not achieve their full potential in the United States and will be pushed to the many other jurisdictions actively seeking to host the next wave of innovation.”

The brief also said that the SEC’s order denying Coinbase’s request included just one sentence regarding the apparent effectiveness of the current system. CCI Council Ji Kim alleged  it was “devoid of any meaningful detail or reasoning”. 

Coinbase Pivoting to International Market

The CCI’s argument echoes Coinbase’s warning  that America risks losing out on one million Web3 jobs over the next seven years unless the SEC changes course.

While the firm has no plans to back out of the American market, it has doubled down on its international business. Coinbase has explicitly sought shelter regions with a more favorable regulatory framework for crypto.

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