Coinbase CEO Brian Armstrong recently discussed the company’s preparation for a potential court battle with the U.S. Securities and Exchange Commission (SEC).
On Tuesday (April 18), during an interview with CNBC’s Arjun Kharpal, Armstrong expressed disappointment that the SEC had not provided any feedback during their 30 meetings over the past year, stating,
“Over the last year, we had 30 meetings and never got a single piece of feedback from them about what we could be doing better or differently and then this Wells Notice arrived, so it’s really unfortunate.”
He argued that the SEC had abdicated its responsibility to establish clear standards for the market and that going to court may be necessary to get the clarity they need:
“I think we’re going to have to actually end up going to court to get the clarity we need and create that case law. It’s an abdication of responsibility. I mean, the regulator’s job is to publish a fear rulebook and allow that market to be safe, also to flourish in that country and I think they’ve completely abdicated responsibility.”
Armstrong stated that Coinbase is prepared for a lengthy legal battle if the suit drags on for years:
“We never seek litigation, but it seems in this case that they have initiated it and if we need to get the courts to get the clarity that we need, we’re very prepared to do that.”
He believes the law is on their side and is optimistic that if a suit ensues, Coinbase will likely win the case:
“I think the law is on our side, and the SEC has to follow the rule of law. I think their actions would not be sympathetic to a jury and so we’re very prepared for this. We’re going to court to win. Just to be clear, I think we have a very strong case and that’s exactly what we intend to do.”
On the same day, SEC Chair Gary Gensler testified before the House Financial Services Committee, highlighting tensions between the SEC and congressional Republicans over digital asset regulation. Republicans on the committee had sent a letter to Gensler before the hearing, criticizing the SEC’s approach to digital asset regulation and arguing that the national securities exchange (NSE) framework was not a good fit for digital assets.
During the hearing, Gensler emphasized that most crypto tokens are considered securities and that compliance with securities laws is not optional. He pointed out that crypto intermediaries often combine various functions, such as exchange, broker-dealer, custodial, clearing, and lending, leading to conflicts of interest and risks for investors. Gensler argued that crypto investors should receive the same protections as other investors and that calling oneself a DeFi platform does not excuse noncompliance with securities laws.
Gensler highlighted the current noncompliance in the crypto market, noting that it endangers investors and jeopardizes public trust in capital markets. He explained that the SEC had addressed this issue through enforcement actions and rule proposals. The hearing featured intense exchanges between Gensler and Republican committee members who criticized the SEC’s handling of crypto regulation, expressing frustration with the SEC’s perceived lack of clarity and guidance for the crypto market. However, Gensler maintained that the SEC is mandated to protect investors, regardless of the labels or technology used, and stressed that the crypto markets are not incompatible with securities laws.