One of the largest crypto exchanges based in the United States, Coinbase, has filed a response to the complaint that was made by the Securities and Exchange Commission (SEC).
According to the US securities regulator, Coinbase was illegally brokering securities. The exchange has responded that the SEC does not have the power of regulating crypto exchanges.
The company has further asserted that the enforcement action taken by the regulatory body is against due process.
The SEC had taken the entire crypto industry by storm when it filed a legal complaint against Coinbase for selling unregistered securities.
The filing was announced by the CLO of Coinbase, Paul Grewal, which was made in response to the complaint.
The document comprises 177 pages in which Coinbase has elaborated that the SEC had given it the green light to conduct an IPO on Nasdaq back in April 2021.
The exchange said that after it had gone public, millions of institutional and retail investors had bought its shares.
It asserted that the enforcement action that the regulatory authority has taken recently is in contradiction of the approval it had granted the exchange earlier.
The company criticized the new stance of the SEC on crypto exchanges and said that since April 2021, no statute had been implemented for giving the regulator the authority to oversee crypto exchanges.
It said that the only change had been in the position of the SEC in terms of its powers and nothing more, which is against due process.
A timeline was also presented in the document, which highlighted the change in the views of Gary Gensler, the chairman of the Securities and Exchange Commission (SEC), regarding the crypto industry.
According to Coinbase, Gensler had appeared before Congress in May 2021 and testified that the SEC did not have the authority to oversee companies like Coinbase.
He had cited a ‘regulatory gap’ and had put the responsibility of regulating the crypto space on Congress.
But, over time, Gensler had changed his position. Coinbase stated that by the end of last year, Gensler had decided that they have enough authority to regulate the space.
Therefore, they demanded that crypto firms register themselves as securities exchanges with the regulatory body.
Coinbase went on to say that the SEC was now attempting to get punitive retroactive penalties from digital exchanges and crypto firms for not recognizing its powers that its boss had disclaimed two years earlier.
According to the crypto exchange, even if the changes that the SEC has made regarding securities are ‘colorable’, then courts would first have to reject this construction.
This is a legal principle in the United States, which outlines that courts would assume that issues of major economic and political significance are not delegated to executive agencies by Congress.
It should be noted that the SEC has become very active in the crypto space and has taken enforcement action against several companies in the last year.