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Crypto exchange Coinbase is asking a court to make a ruling in a move to get documents from the U.S. Securities and Exchange Commission about how securities laws apply to crypto.
Coinbase, through a retained consultant firm History Associates Inc., asked the U.S. District Court for the District of Columbia if it could file a motion for partial summary judgment on Tuesday. This comes after Coinbase sued the SEC and the Federal Deposit Insurance Corporation in June for not complying with its Freedom of Information Act request. FOIA requests, made under the Freedom of Information Act, allow the public to ask for records from any federal agency.
Coinbase is looking for external and internal communications about the SEC's investigations about whether something is a security or not, specifically ether. Whether ether is a security or not has become a sticking point for the industry.
Blockchain software firm Consensys raised the issue in a lawsuit it lodged against the SEC in April and said the former SEC's Director of the Division of Enforcement, Gurbir Grewal, approved the investigation into "Ethereum
ETH +4.08%
2.0" in March 2023 to investigate individuals and entities buying and selling ether. The firm later said the SEC said it was closing its investigation into Ethereum 2.0.
The SEC has also brought a number of enforcement actions against crypto platforms and projects over the past year. The agency sued Coinbase in a separate case last year for operating its platform without registering.
The SEC has been firm in refusing to produce documents the exchange asked for and claimed at first that the agency was exempt from FOIA, but recently said that may not be true, Coinbase Chief Legal Officer Paul Grewal said in an interview with The Block.
Now the SEC says it will take three years to produce the documents Coinbase wants, according to Tuesday's filing.
"Yet instead of promptly producing responsive documents, the SEC now insists it must start over and re-review the documents for other potential reasons to withhold them that it apparently never considered—and it will not even begin that repeat review for three years," History Associates said in the complaint.
Coinbase had also said it asked for documents on two now-closed investigations, one involving Zachary Coburn and another for Enigma MPC. The firm asked for "records… reflecting or concerning any investigation" involving the two. Enigma MPC is a data encryption startup that settled with the SEC in 2020 after the agency said tokens offered by the firm were securities, thereby violating securities laws. In the other case, Coburn created an online platform for trading crypto called Ether Delta, which the SEC said met the definition of an exchange and should have been registered. Coburn settled with the SEC in 2018.
Next, the judge will decide whether Coinbase can file a motion for the partial summary judgment. After, the SEC will respond. If the court allows Coinbase to file a motion for partial summary judgment, Grewal said he would be surprised if the judge issues a ruling before the end of the year.
Coinbase and History Associates also sent FOIA requests to the FDIC regarding the agency's "pause letters." The FDIC began issuing "pause letters" between March 2022 and May 2023 to some financial institutions asking them to not expand crypto-related activities and to provide more information, according to a 2023 report from FDIC's Office of Inspector General. That office is tasked with evaluating the FDIC.
Coinbase previously said in its complaint that the letters were part of a new incoming "Operation Choke Point 2.0."
Written by Sarah Wynn for theblock.co