- Coinbase has published over 10,000 documents obtained from several U.S. agencies through FOIA requests.
- The SEC ignored requests from a New York judge to clarify Ethereum’s status as a security.
- Since former SEC Chairman Gary Gensler departed, the regulator has dropped several cases against crypto, including Coinbase and Ripple.
Coinbase has long fought with the U.S. Securities and Exchange Commission (SEC) over its mishandling of the crypto industry, enforcement-only approach, and lack of regulatory clarity.
Now, following several Freedom of Information Act (FOIA) requests, Coinbase has secured and published over 10,000 documents, many of which reveal the SEC’s admission to “gaps” in crypto regulations and its unwillingness to fill them.
Reluctant To Regulate
As per Coinbase’s Chief Legal Officer (CLO), Paul Grewal, early findings from the document drop reveal that the SEC knew about and acknowledged the “crypto regulatory gap” in 2019, years before it argued no such thing had existed.
There are also some curious findings, such as a 2023 email between SEC staffers citing a lack of IT capabilities as a reason for not opening Coinbase’s response to receiving a Wells notice.
You’ll Want To See This
More specifically, some of the more interesting findings uncovered by the exchanges’ FOIA are revelations tied to the regulatory status and classification of Ethereum and Ripple, and the SEC’s reluctance to clarify its stance under former Chairman Gary Gensler.
SEC Calls XRP a Security
The SEC levied a lawsuit against Ripple (XRP) in 2020, beginning a four-year tussle between the two. It alleged that XRP was a security, and that Ripple had raised more than $1.3 billion by selling an unregistered security.
In a December 2021 letter to Ripple, the SEC is seen referring to Ripple’s XRP token as a security. This came as a result of Ripple’s plans to launch its Liquidity Hub.
The SEC was “disappointed” with Ripple’s intentions to launch without consulting with the regulator first. But, two weeks later, Ripple responds and describes the SEC’s claim as “confounding”, arguing the SEC is “not Ripple’s prudental regulator.”
Ripple also referred the SEC to previous instances where engagement with the SEC has been “ultimately met with enforcement action or threat of one with no guidance at all.”
“There is no requirement or obligation that Ripple consult with the SEC over how to conduct its business.”
Now that Gensler has departed from the SEC, the agency has dropped its case against Ripple.
Ethereum Ambiguity
Documents show that New York’s Attorney General’s office attempted to obtain SEC input regarding Ethereum during the 2023 KuCoin case.
More specifically, they asked the SEC to submit an amicus to support an argument that ETH was a security, not a commodity.
A June 2023 letter from Attorney General Investor Protection Bureau Chief Shamiso Maswoswe didn’t believe the decision would affect the outcome, writing:
“Whether it is or not will not be dispositive in our case (we have authority over both securities and commodities) – but I think it would be beneficial to investor protection to get a court to hold that Ether is a security. Conversely, it wouldn’t be great (though again not dispositive) for the court to decline to find it’s a security.”
The SEC failed to respond and didn’t comment on the KuCoin case.
The regulator’s silence on ETH’s status was deafening following its transition to proof-of-stake (PoS). Matters became more confusing when it approved spot ETH exchange-traded funds (ETFs).
As investigators and sleuths continue to pore over the gigantic trove of documents, we can likely expect even more revelations.
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