Allowing Coinbase to go public was not a ‘blessing’ of business: SEC

The US Securities and Exchange Commission (SEC) has argued in court that approving a firm’s S-1 application to go public does not represent a “blessing” from the agency, nor does it provide verification that the business regulatory compliance.

In the interest of transparency, here is a transcript of our hearing yesterday in the SDNY case brought against us by the SEC. We appreciate the careful consideration of the Court. https://t.co/NEEsr05fos

— paulgrewal.eth (@iampaulgrewal) 14 July 2023

July 13 according to the court document From a pre-motion hearing of the SEC vs. Coinbase case, the SEC insisted that it was not signing off on Coinbase’s business structure when giving the green signal for it to go public back in April 2021.

“Your Honor, I would say that just because the SEC allows a company to go public does not mean that the SEC is blessing the underlying business or the underlying business structure or saying that the underlying business structure violates the law.” Not doing it, said SEC trial attorney Peter Mancuso, saying:

“There is no way that an S-1 approval is a blessing in disguise for the entire business of a company. In fact, there is no evidence being provided that the SEC looked at specific assets and made specific determinations and then consoled Coinbase that it would not later be found to be a security.

On Crypto Twitter, several people highlighted the implications of such statements, including Gemini co-founder Cameron Winklevoss, as he questioned why the SEC would allow an allegedly non-compliant business to go public in the first place, Given that its goal is to protect America. consumer.

So do they allow IPOs for illegal trading and let Americans invest in them? lmao it’s cooked

— Metatron (@metatron_0x) 14 July 2023

US-based firms are required to submit an S-1 filing with the SEC before they can begin listing their shares on a national stock exchange. As part of the filing, the companies must provide a comprehensive description of their business structure and how the proceeds from the initial public offering will be used.

Following Mancuso’s comments, US District Judge Katherine Polk Felia said: “Let us pause so that when I hear that answer I can get rid of the doubts I currently have in my mind,” as he raised a few questions.

“I am not saying that the commission should be omniscient and know everything while evaluating the registration details,” she said.

“But I would have thought that the commission was doing due diligence in what Coinbase was doing, and somehow I thought it would say, you know, you really shouldn’t be doing this. Is this a violation of securities laws, or are we in some interesting uncharted territory here with regards to whether assets on your platform are securities, so be aware that there might be a problem someday.

In response, Mancuso ultimately reiterated the SEC’s argument that the S-1 filing is more focused on approving company disclosures, not the agency itself signing off on a business structure through approval.

Judge Felia then asked Mancuso whether the SEC could not have said to Coinbase: “‘Hey, you guys need to register as a securities exchange.'”

“It was within the SEC’s authority to do that, wasn’t it?” she questioned.

Mancuso replied, “I really can’t talk to him.”

Connected: It’s Time for the SEC to Settle with Coinbase and Ripple

The SEC initially charged Coinbase with an alleged unregistered securities offering dating back to 2019.

Coinbase is pushing for an early dismissal of the case on a number of grounds, one of its arguments being that the company has been asked by the SEC to “detailedly describe” its business structure and planned activities to the agency prior to the Coinbase IPO. taking a fee.

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