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Coinbase is ramping up its legal defense against the Securities and Exchange Commission (SEC), petitioning a federal court to force the Commodity Futures Trading Commission (CFTC) to hand over critical communications.
On October 1, the crypto exchange filed a motion to compel the CFTC to provide any interactions it had with issuers of 12 digital tokens that the SEC alleges are unregistered securities. Coinbase argues that access to these documents could be pivotal in disproving the SEC’s claims.
The lawsuit, brought by the SEC in June 2023, accuses Coinbase of operating illegally as a broker, exchange, and clearing agency. Central to Coinbase’s defense is the assertion that the 12 cryptocurrencies under scrutiny may not meet the legal definition of securities. As such, the exchange is seeking information from the CFTC to help clarify the regulatory boundaries and assess whether the agency had communicated conflicting views regarding these digital assets.
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CFTC’s Response Frustrates Coinbase
Coinbase first subpoenaed the CFTC in July, following an earlier, broader request in June. However, the CFTC has reportedly failed to conduct any meaningful search for the requested documents. the exchange claims that the CFTC has “stonewalled” its attempts to access information crucial to its defense.
Coinbase has expressed frustration with the regulator, accusing it of evading the request by citing overbreadth, burden, and privilege concerns. Despite the CFTC’s willingness to reconsider a narrower subpoena, Coinbase says its follow-up attempt was again dismissed, with the CFTC calling it overly broad and vague.
In response, Coinbase has argued that the CFTC has failed to provide evidence that searching for the communications would create an undue burden.
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Judge Failla’s SEC Ruling May Aid Coinbase
Coinbase’s motion also references a decision by New York federal judge Katherine Folk Failla, who ordered the SEC to produce relevant information in the same case. This precedent strengthens Coinbase’s argument that it should have similar disclosures from the CFTC, which may offer critical insights into the regulators’ handling of digital assets.
If Coinbase succeeds, the documents it obtains from the CFTC could shift the balance in its defense against the SEC’s lawsuit.
