Cryptocurrency exchange Coinbase won a partial victory in federal court this week in its ongoing legal battle with the U.S. Securities and Exchange Commission (SEC).
Judge Catherine Failla of the Southern District of New York partially approved a motion to force Coinbase to file documents with the SEC related to classifying its crypto tokens as securities, in a filing on Sept. 5.
In the X post, Coinbase Chief Legal Officer Paul Grewal noted that the order would require the SEC to present “significant evidence” in the civil lawsuit.
Coinbase has been embroiled in a legal battle with the SEC since the regulator took enforcement action against Coinbase in June of last year. The SEC alleged that Coinbase violated securities laws by operating as an unregistered exchange, broker, and clearinghouse.
In July, Coinbase filed a motion to compel discovery, claiming that the agency had failed to produce materials that formed the basis of its defense in the case, including documents related to “Applying the Securities Laws to Tokens and Services and Digital Assets.” Essentially, this refers to documents related to how the agency applies the Howey Test to crypto tokens.
The exchange also requested documents related to Coinbase’s initial public offering (IPO) deliberations and comments made by Chairman Gary Gensler on cryptocurrencies.
In August, the SEC alleged that Coinbase’s request was overly broad and that the company was seeking to access documents that were not relevant to the case.
Judge Limits Scope of Coinbase Subpoena
In June, Coinbase subpoenaed Gensler to turn over his personal emails, which it claimed were important to the ongoing case. The documents in question date back to 2017, four years before he was sworn in as SEC chairman in 2021.
The exchange later amended the subpoena to include only documents dated after his inauguration. However, Coinbase withdrew its request for Gensler’s private communications “based on clear statements made directly to Judge Failla by SEC attorneys,” Grewal told The Block.
Grewal further explained that the SEC swore to the judge that Gensler had never used personal communications in the conduct of SEC business “under the penalty of perjury for all practical purposes.” This forced the exchange to drop its lawsuit over the documents, Grewal added.
Coinbase has requested that the SEC conduct a preliminary search of its non-enforcement files and provide a report on its findings to resolve the SEC’s unfounded claims of burden. The request was sent to top SEC executives and current and former SEC commissioners. In response, the agency offered to provide the results of searches on five employees, an anonymous source told The Block.
However, the judge ordered the SEC to expand its search, but did not go as far as Coinbase requested. For example, the judge removed current and former commissioners from the list. The judge also obtained a motion in the order requiring the SEC to “permanently file” certain deletions.
The anonymous source added that the SEC only needs to turn over internal documents with external attachments.
Grewal also said:
“While we may have withdrawn certain requests and the judge may have recognized certain reasonable limits, this order was an order that acknowledged the core of the discovery we had been seeking for months.”
Judge Faila’s order came the same day another federal judge allowed a class action lawsuit against Coinbase to proceed, which claims the exchange has downplayed the risks to users of its ongoing lawsuit with the SEC.