SEC’s Neglect to Alert Coinbase Regarding Securities Law Violation Prior to Public Listing, Court Affirms
In a recent development, a federal judge in New York has highlighted that the U.S. Securities and Exchange Commission (SEC) had the chance to inform Coinbase about potential securities law violations before granting approval for its public listing.
The SEC had previously filed a lawsuit against Coinbase, a well-known firm listed on Nasdaq, accusing it of selling unregistered securities.
During the pre-trial conference, SEC counsel Peter Mancuso clarified that approving Coinbase’s S-1 application for an initial public offering (IPO) did not imply the commission’s endorsement of the entire business operations of the crypto exchange or its compliance with the law. Mancuso emphasized that the SEC’s approval of a company’s public listing does not equate to a confirmation of its underlying business structure’s legality.
Judge Katherine Polk Failla expressed her curiosity regarding the SEC’s failure to provide Coinbase with advance warning or guidance on potential regulatory ambiguities. She suggested that the agency could have advised or cautioned the exchange before granting approval for the public listing.
While acknowledging that the SEC cannot be expected to possess complete knowledge during the evaluation of a registration statement, Judge Failla expected due diligence from the commission regarding Coinbase’s activities. She anticipated that the SEC would have alerted Coinbase if its actions were in violation of securities laws or if there were uncertainties surrounding the classification of assets on the platform.
The judge also noted that Coinbase’s assumption of compliance was reasonable, considering the absence of any prior warning from the SEC before the IPO. She questioned why the SEC did not exercise its authority to mandate Coinbase’s registration as a securities exchange if it believed it was necessary.
In Judge Failla’s view, Coinbase’s confidence in its actions was not unfounded, as it had followed the same course permitted by the SEC when it issued the S-1 filing.
This recent court discussion sheds light on the missed opportunity for the SEC to alert Coinbase to potential violations, leaving room for further examination of the regulatory landscape surrounding cryptocurrencies and securities laws.
Disclaimer: The information provided in this article is for informational purposes only and should not be construed as financial or investment advice. Cryptocurrency investments are subject to market risks, and individuals should seek professional advice before making any investment decisions.