One of the largest crypto exchanges in the United States, Coinbase, is involved in a legal tussle with the Securities and Exchange Commission (SEC).
In the latest move, its CLO, Paul Grewal, has accused the securities regulator of violating the law in their interpretation of an investment contract.
The reasoning that Grewal put forward came from the decision of the Supreme Court of the United States (SCOTUS), which used the ‘major questions doctrine’ to thwart the student loan forgiveness program of President Biden.
The CLO
The chief legal officer of Coinbase, Grewal has spoken out against the position of the SEC about classifying some of the crypto tokens in the market as securities.
Grewal said that the definition of the SEC of an investment contract was against current regulations and incorrect.
He stated that their interpretation was actually in violation of the law. In addition, he added that the actions of the securities regulator were beyond the violation.
He was referring to the claims of the SEC about having the authority to implement rules for all crypto tokens that it has categorized as securities.
He stated that claiming to have authority over all crypto tokens in the market other than ‘BTC’ had major political and economic significance.
This is because there is one fundamental requirement, which state that the purchaser and enterprise need to have enforcement rights.
The reasoning
The reasoning that Grewal has put forward is from the ruling of the Supreme Court in the Biden v. Nebraska case.
As per the outcome of the case, the student loan forgiveness program of President Biden worth $420 million had been struck down in accordance with the major questions doctrine.
Paul Grewal believes that the same reasoning can also be applied in the case of Coinbase and the SEC, where the former has been accused of securities violations and unregistered brokerage by the latter.
Noah Feldman, a professor at Harvard Law School, explained the major questions of doctrine. He said that if a big and new move is made by the executive branch, the court will check for Congress authorization.
If there is no Congressional authority, then it will be struck down. This doctrine was introduced in its recent filing by Coinbase against the SEC.
The argument
According to the crypto exchange, the interpretation of the SEC about the securities law should be rejected because the issue would first have to be regulated by Congress for establishing standards applicable to digital assets.
Grewal also asserted that Congress is actively working on passing legislation in the future that would be helpful in fixing standards. Therefore, it cannot be considered a close call.
The US Securities and Exchange Commission (SEC) has been using the enforcement approach to go after several big names in the crypto industry.
Coinbase and Binance, which is the largest crypto exchange in terms of trading volume, are the two most recent victims of the actions of the SEC, which has thrown the entire market in turmoil.