Allowing Coinbase to go public wasn’t a ‘blessing’ from the SEC, says the regulatory agency. In court, the United States Securities and Exchange Commission made it clear that approving Coinbase’s S-1 application doesn’t imply their endorsement of the company’s compliance with regulations.
Yesterday, during the hearing for the SEC vs. Coinbase case, the court documents from July 13 shed light on the SEC’s standpoint. According to the SEC, granting Coinbase the greenlight to go public in April 2021 didn’t equate to giving a thumbs-up to their entire business structure.
SEC trial counsel Peter Mancuso emphasized that approval of an S-1 filing doesn’t constitute the SEC’s endorsement of a company’s underlying business or its compliance with the law. He further clarified that no evidence suggests the SEC evaluated specific assets or made determinations ensuring they wouldn’t be classified as securities in the future.
This raises concerns among Crypto Twitter users, who question why the SEC would permit a potentially noncompliant business to go public, especially considering its responsibility to protect U.S. consumers.
As per U.S. regulations, companies must file an S-1 with the SEC before listing shares on a national stock exchange. The filing requires a comprehensive disclosure of the company’s business structure and the utilization of proceeds from the initial public offering.
Judge Katherine Polk Failia, presiding over the case, expressed her skepticism about the SEC’s position and raised pertinent questions. She highlighted the expectation that the SEC should exercise due diligence in evaluating Coinbase’s activities and potentially discourage noncompliant behavior.
While acknowledging that the SEC cannot be omniscient, Judge Failia believed the commission should have cautioned Coinbase if its actions violated securities laws or if their asset classification posed potential legal complications.
In response, Mancuso reiterated the SEC’s argument, clarifying that the focus of S-1 filings is primarily on approving company disclosures rather than the agency’s endorsement of a business structure.
Judge Failia then inquired whether the SEC had the authority to require Coinbase to register as a securities exchange. Mancuso’s reply was uncertain, stating he couldn’t speak definitively on the matter.
The SEC initially charged Coinbase for alleged unregistered securities offerings dating back to 2019. Coinbase is now seeking an early dismissal of the case on various grounds, contending that the SEC is unjustly prosecuting them despite the exhaustive description of their business structure and planned activities submitted to the agency before the public offering.
The SEC is facing significant scrutiny in court, and it seems this battle is far from over.