Coinbase has sued the United States Securities and Exchange Commission (SEC), asking the agency to disclose its spending on non-fraud investigations of the cryptocurrency industry.
The lawsuit, filed under the Freedom of Information Act (FOIA), is Coinbase’s latest effort to hold regulators accountable for what it considers unpredictable and unclear regulatory enforcement.
Coinbase’s Chief Legal Officer, Paul Grewal, underlined the necessity of public awareness of these expenditures to promote fairness and accountability in regulatory actions.
Years of conflict between Coinbase and the SEC have worsened as the agency tightened its supervision of cryptocurrency firms. The SEC accused Coinbase of operating as an unregistered exchange and broker, while Coinbase accused the agency of not having published clear rules for the sector.
The matter became more urgent as soon as the Coinbase crypto giant got a Wells Notice in March 2023 indicating possible enforcement action. Since then, Coinbase has fought back, demanding regulatory clarification and questioning the SEC’s focus on enforcement-first policies.
Details of the SEC FOIA Lawsuit
The lawsuit aims to uncover detailed records of the SEC’s spending on non-fraud investigations since Gary Gensler became chairman.
The request encompasses enforcement actions on digital asset sales, staking, lending, and secondary market transactions from April 2021 to January 2025.
Coinbase requests disclosure of staff hours and transparency in budget and salaries for the Crypto Assets and Cyber Unit. Chief Legal Officer Paul Grewal stated that taxpayers deserve transparency on these expenditures.
He argues that transparency is important to ensure accountability and fairness in regulatory enforcement. The SEC has not publicly commented on the lawsuit so far.
Crypto’s Regulatory Turning Point?
Coinbase’s lawsuit can potentially transform crypto regulation by challenging the SEC’s enforcement-first approach. The lawsuit highlights the broader debate on whether digital assets should be regulated as securities, which was the main argument in the SEC’s lawsuits against Coinbase and other firms.
Coinbase argues that confusing regulations inhibit innovation and calls for standardized regulatory frameworks. If successful, the lawsuit could force greater transparency and accountability and potentially influence how regulators treat crypto firms. The decision could also set a pattern for balancing regulation with the cultivation of innovation in the U.S. crypto sector.
The cryptocurrency community views Coinbase’s FOIA lawsuit as a step towards addressing regulatory uncertainty. Many see the action as an initiative to encourage regulators into consistent and transparent regulation, which would be a win for the industry.
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