- Coinbase has been granted access to SEC communications by the judge overseeing its securities case
- Judge Failla allowed Coinbase to search for written records pertaining to the Howey Test within the crypto space
- Coinbase withdrew its request for Chair Gary Gensler’s private communications on the matter
Coinbase has been granted access to a portion of Securities and Exchange Commission (SEC) communications by the judge overseeing the case, but only after it dropped its demand for Gary Gensler’s personal communications. Judge Katherine Failla partially granted and partially rejected Coinbase’s motion a month after the SEC described the exchange’s request as “breathtakingly broad.” Coinbase hopes that the files will contain information that shows the agency undermining its own claims about cryptocurrencies being securities which it can use in the upcoming trial.
Motion Did Not Start Well
Coinbase’s motion, filed in July, sought three things:
- Documents Outside the Enforcement Division: Coinbase seeks documents from other SEC divisions, such as FinHub and Corporation Finance, and from commissioners, arguing their relevance to the SEC’s claims and Coinbase’s fair notice defense.
- Public Offering Documents: Coinbase requests documents related to its public offering to demonstrate that the SEC did not previously consider its operations to be in violation of securities laws.
- Chair Gensler’s Communications: Coinbase seeks communications from SEC Chair Gary Gensler, including those made in his personal capacity, to clarify the SEC’s public statements and regulatory stance on digital assets.
Judge Failla took exception to the demand for Gensler’s records, however, saying that she was “surprised and not in a good way” over the company’s attempt to subpoena Genselr’s private communications. She labelled the grounds supporting it “fatutous,” but did alow Coinbase to file a motion to compel so that its arguments could be explored further.
Coinbase resubmitted, retaining the demand for Gensler’s records, to which the SEC responded by complaining about the nature and scope of the request, calling it “breathtakingly broad” and noting that it had produced over 240,000 documents concerning the crypto assets at issue and had “spent over 400 hours reviewing 64,000 documents to prepare a 648-page, 14,000-entry privilege log.”
The agency added that Coinbase has been “wholly unable to justify the Subpoena,” alleging that the company cut short meetings convened to discuss the issue. Coinbase withdrew its demand for Gensler’s private communications shortly afterwards, perhaps realising it was never going to happen.
Coinbase Wins Big
Judge Failla ruled on the motion last Thursday following a conference call, noting that her aim had been to balance “the relevance of the materials sought by Coinbase with the difficulty for the SEC in isolating and reviewing that material.” In doing so, she ruled overwhelmingly in Coinbase’s failure, particularly in relation to discovery concerning the Howie test, which is central to determining whether certain transactions qualify as securities.
Coinbase legal chief Paul Grewal celebrated the victory:
Today Judge Failla ruled from the bench on our motion to compel @SECGov to provide key information for the defense of our case. In short, the Court ordered the SEC to produce important discovery. I’ll share the full transcript when we have it, so you can read it for yourself. In…
— paulgrewal.eth (@iampaulgrewal) September 5, 2024
Given that Coinbase had withdrawn its request for Gary Gensler’s personal communications, this represented a huge victory. Coinbase will be hoping that the documentation, which is expected to be voluminous, will allow it to poke holes in the SEC’s position, although at this point, there are more hopes than expectations.
