In its petition, initially submitted in July of last year, Coinbase argued that most of the tokens traded on its platform shouldn’t be defined as securities. It also wants the SEC to define what tokens are classified as such.
The SEC didn’t immediately reply to the petition, instead sending Coinbase a Wells notice urging it to comply with existing law on its various offerings and services including its staking services and the Coinbase Earn program.
Eventually, Coinbase sued the SEC requesting that the federal appellate court in Philadelphia issue a mandamus. A mandamus is an uncommon legal mechanism whereby, in certain circumstances, a public entity is required to take a particular action in line with its statutory mandate.
In its response on Monday, however, the SEC claimed that Coinbase isn’t entitled to a mandamus and that it should instead comply with existing laws. A mandamus, the SEC said, is “an extraordinary measure that requires the petitioner indisputable right to relief.”
Coinbase’s mandamus demanded the SEC answer ‘yes’ or ‘no’ to its petition.
The regulator also went as far as to claim that Coinbase is proposing the impossible by requesting it replaces existing security laws with a new legal regime — something that is completely beyond its statute. It attempted to justify its delayed response by saying that Coinbase filed its petition 10 months ago but only supplemented it with more details two months ago.
Coinbase has threatened to up sticks and move
Coinbase has recently upped the ante in its legal struggle with US authorities by threatening to pull out of the US altogether and move to another jurisdiction. Coinbase CEO Brian Armstrong has visited Dubai and praised its leadership and “forward-thinking on crypto.”
Armstrong did row back on this threat, however, saying, “We’re always going to have a US presence … But the US is a little bit behind right now.”
The United Arab Emirates has recently been closely monitored by the Financial Action Task Force (FATF) for money laundering activities. Other countries on the same list include Syria, Yemen, the Cayman Islands, Gibraltar, Albania, and the Philippines.
The legal debate on crypto is currently in full swing in the US with various senators proposing different bills. SEC chairman Gary Gensler is arguing that his organization is the best placed to regulate crypto and he has been consistent in describing most crypto tokens as securities. This is except for bitcoin which he considers as a commodity.
Gensler has also been consistent in arguing that tokens issued and controlled by centralized entities are most probably securities.