Op-ed: Why the SEC should stay away from crypto (Part III)

This article is the final part of a three-part series. We suggest reading parts one and two for context.

As The Wall Street Journal highlighted in a recent article, Coinbase’s argument around their successful IPO presents a “novel” defense in court. As most of us are aware, when Coinbase went public, it had already listed several of the “problematic” tokens listed in the SEC lawsuit, yet the SEC greenlighted its IPO all the same.

In a Bloomberg op-ed, Matt Levine argued that the SEC’s role in approving public listings does not look into a company’s business model. The SEC assesses the disclosed risks of the business model, not whether any securities the business offers customers are done so legally, according to Levine.

Interestingly, however, Levine highlighted that “Coinbase went public three days before Gensler was sworn in at the SEC; he was just a bit too late to stop the IPO,” suggesting the current SEC Chair may not have approved the listing had it been delayed until he took over.

Furthermore, in relation to the “disclosed risks” to investors. Coinbase mentions the word “securities” 821 times in its S1 filing to the SEC (after removing mentions of “securities act” from the results.) In comparison, popular crypto terms such as NFT, token, staking, and even cryptocurrency are mentioned just 1, 41, 36, and 3 times, respectively.

How will Coinbase defend the lawsuit?

In light of these revelations, we find ourselves at a critical juncture where Coinbase’s novel defense hinges on the letter of the law, notably the Securities Act of 1933 (the ‘33 Act) and the Securities Exchange Act of 1934 (the ‘34 Act), and possible applications in court.

The ‘33 Act and the ‘34 Act are significant pieces of U.S. legislation enacted to regulate the primary and secondary trading of securities such

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Author: Liam ‘Akiba’ Wright

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