The US Securities and Exchange Commission (SEC) has argued in court that approving a company's S-1 application to go public does not represent a "blessing" from the agency or provide verification that the company complies with the standards.
For the sake of transparency, here is the transcript of our hearing yesterday in the SDNY case brought against us by the SEC. We appreciate the Court's careful consideration. https://t.co/NEEsr05fos
โ paulgrewal.eth (@iampaulgrewal) July 14, 2023
According to the court of July 13 documents from the pre-movement SEC vs. Coinbase hearingthe SEC claimed it was not signing off on Coinbase's business structure when it gave it the green light to go public in April 2021.
"Your Honor, I will say that just because the SEC allows a company to go public does not mean that the SEC is blessing the underlying business or the underlying business structure or saying that the underlying business structure is not violating the law," Trial Counsel for the SEC Peter Mancuso said, adding that:
โThere is no way that the approval of an S-1 is a blessing for the entire business of a company. In fact, no evidence is presented that the SEC analyzed specific assets and made specific determinations and then gave Coinbase assurance that it would not later be considered a security."
Taking to crypto Twitter, several people, including Gemini co-founder Cameron Winklevoss, highlighted the implications of such statements, as they questioned why the SEC would allow an allegedly infringing company to go public in the first place, given that their goal is to protect US consumers
So they allow IPO for illegal businesses and allow Americans to invest in it? lmao sec is cooked
โ Metatron (@metatron_0x) July 14, 2023
US-based companies must file an S-1 filing with the SEC before they can begin listing their shares on a national stock exchange. As part of the filing, companies must provide a full summary of their business structure and how proceeds from an Initial Public Offering will be used.
Following Mancuso's comments, US District Judge Katherine Polk Failia said: โLet's take a break so I can get rid of the skepticism I currently have when I hear that answer,โ and then he posed a few questions.
โI am not saying that the commission should be all-knowing when it comes to evaluating a registration statement and that it should know everything,โ he said, adding:
โBut I would have thought that the commission was looking into what Coinbase was doing, and I kind of thought I would say, you know, you really shouldn't do this. This either violates securities laws, or we're in interesting unfamiliar territory here as to whether the assets on your platform are securities, so keep in mind that maybe one day there could be an issue."
In response, Mancuso finally reiterated the SEC's argument that S-1 filings are more focused on approving company disclosures, rather than the agency itself approving a business structure through an approval.
Judge Failia then asked Mancuso whether the SEC could not have told Coinbase, "'Hey, you need to register as a stock exchange.'"
"That was within the power of the SEC, wasn't it?" she asked.
"I can't really talk about it," Mancuso responded.
Related: It's time for the SEC to settle for Coinbase and Ripple
The SEC initially charged Coinbase for allegedly unregistered securities offerings dating from 2019.
Coinbase is pushing for a early dismissal of the case for various reasons, and one of their arguments is that the SEC is charging the company despite the fact that its business structure and planned activities were "exhaustively described" to the agency prior to Coinbase's IPO.
Magazine: Crypto Regulation: Does SEC Chairman Gary Gensler Have the Final Say?
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