Coinbase files Amicus Brief in insider trading case: “We need regulations”

The digital assets that Coinbase lists are not securities, but Coinbase, if given the proper guidance and rules from the Securities and Exchange Commission, would like to list securities, Coinbase said Monday in an amicus brief. But the SEC’s willingness to work with the exchange in a productive way has been limited, it says in brief.

Coinbase filed an amicus brief as part of a case against former employee Ishan Wahi. Wahi, along with his brother, has been charged with insider trading, and is the subject of a civil complaint by the SEC for securities fraud, regarding the leaking of information about new token listings on Coinbase.

While Wahi has pleaded guilty to the insider trading charges, he disputes the SEC’s allegations of securities fraud, arguing that the tokens in question were not securities, and is pushing for the case to be dismissed.

Coinbase’s filing of the amicus brief should not be read as a signal of support for Wahi, insiders say, but rather an attempt to force the SEC out of what should be a criminal case.

“The SEC’s lawsuit rests on the erroneous premise that the seven Coinbase-listed assets identified in the complaint are ‘securities.’ But Coinbase does not list any securities on its platform,” Coinbase’s brief states. “The SEC suggests that the digital assets qualify as securities because they are “investment contracts[s]but the assets lack both essential characteristics of the statutory term: They are neither contracts nor investments.”

In mid-February, the trade group Blockchain Association also submitted an amicus brief in the case. The group argued that past regulation by enforcement through the SEC has made the United States an opaque and confusing jurisdiction in which to do business for the digital assets industry.

“Such conduct is unbecoming of a public agency, and inconsistent with due process concerns,” it argued in its brief. “The SEC’s motive is therefore only to go backwards for a precedent that can be used in other cases, as it is actually already doing in other cases where the DOJ has filed suit, and the SEC has piled up similar allegations of violations of securities laws against absent third parties. “

Coinbase also made a similar argument to the Blockchain Association, claiming that the SEC has failed to provide clear guidance, has deviated dramatically from its own previous statements and has previously ignored petitions filed by Coinbase.

“Proceeding with enforcement under these circumstances violates the basic principles of due process and fundamental fairness, which prevent an agency from seeking to punish regulated parties without providing the regulatory clarity necessary to address their legal obligations,” Coinbase’s filing said .

Coinbase accuses the SEC of refusing to follow the guidance Congress has given these agencies, namely the “notice-and-comment rulemaking” process.

“Rulemaking is the only realistic way the SEC can provide fair notice to affected stakeholders and coherently consider all important aspects of regulating the crypto industry,” the document said.

Wahi is due back in court on March 22.