Crypto exchange Coinbase achieved a partial victory in its legal case against the U.S. Securities and Exchange Commission (SEC) this week. The ruling came from Judge Katherine Failla of the U.S. District Court for the Southern District of New York on Sept. 5. The judge granted part of Coinbase’s request to compel the SEC to release documents about the agency’s classification of crypto tokens as securities.
SEC Ordered to Produce Critical Documents
Paul Grewal, Coinbase’s chief legal officer, shared in an X post that this decision would require the SEC to provide “important discovery” in the ongoing civil case. The case stems from an enforcement action the SEC filed against Coinbase in June of last year. The SEC claims that Coinbase violated securities laws by operating as an unregistered exchange, broker, and clearing agency.
Coinbase’s Efforts to Access Key Information
In July, Coinbase filed a motion seeking to compel the SEC to produce materials vital to its defense. These materials include documents related to tokens, services, and the application of securities laws to digital assets, specifically focusing on how the SEC applies the Howey Test to crypto tokens. Additionally, Coinbase requested documents about the SEC’s deliberation of its initial public offering (IPO) and statements made by SEC Chair Gary Gensler on cryptocurrencies.
SEC Pushback on Coinbase’s Requests
In response, the SEC argued in August that Coinbase’s document requests were too broad and unrelated to the case. However, Judge Failla partially granted Coinbase’s request while limiting its reach.
Coinbase Subpoenas SEC Chair Gary Gensler
In June, Coinbase served a subpoena to Gary Gensler, asking for his private emails from as early as 2017, four years before he became SEC chair in 2021. Coinbase later amended this request to include only emails dated after Gensler assumed office. Eventually, Coinbase dropped the request for Gensler’s personal communications after the SEC assured the court that Gensler never used personal communication channels for official business, according to Grewal.
Judge Limits Subpoena Scope But Expands SEC Search
Coinbase also asked the SEC to conduct a preliminary search of non-enforcement files and report any relevant findings. The judge ordered the SEC to widen its search, though not as extensively as Coinbase requested. For instance, the judge excluded current and former SEC commissioners from the search and approved the SEC’s motion to permanently seal certain redactions.
SEC Must Provide Limited Internal Documents
The SEC is required to hand over internal documents with external attachments, but not all requested materials. According to an anonymous source, the agency proposed sharing results from five staff members’ searches in response to Coinbase’s demands.
Grewal emphasized that despite some limitations, this decision grants Coinbase access to key documents it has been seeking for months.
Class Action Lawsuit Against Coinbase Moves Forward
On the same day as Judge Failla’s ruling, another federal judge allowed a class action lawsuit against Coinbase to proceed. The lawsuit claims that Coinbase misled users about the risks of its legal battle with the SEC.
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