How the largest U.S. crypto exchange is brawling with the SEC
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Illustration: Sarah Grillo/Axios
When the Securities and Exchange Commission comes knocking, most companies clam up and hunker down, but that's not the way Coinbase Global is doing it.
Why it matters: The crypto exchange's unusually loud strategy could determine the fate of its legal battle with the regulator — a prize fight being watched as a bellwether for the fate of crypto in the U.S.
Zoom in: Coinbase has been vocal about run-ins with its primary regulator in blogs, tweets, podcasts and media interviews — offering up subpoenas, court filings (theirs and their adversary's) and legal analysis in near real time to the public.
- Lawyers would typically advise their clients against such display.
What they're saying: "For many of us [attorneys], when asked about a pending investigation, the response is 'no comment' or complete silence," Paul Grewal, Coinbase's chief legal officer, tells Axios.
- "I give a lot of credit to our CEO and our board. Very early on we all saw that this was a very different kind of investigation that the SEC was running."
- "In terms of how we thought about public messaging, we needed to start with first principles to basically reconsider anything and everything we had been taught about how to engage."
Details: When exactly Coinbase decided to do this — Grewal demurred. But it's evident the company has held this posture for at least two years.
- Brian Armstrong, chief of Coinbase, took to Twitter in September 2021 when the SEC threatened to sue over a product called Lend that would allow the exchange's retail customers to borrow funds to trade; there was also a blog post.
- When the SEC called Coinbase this past March to say it was considering enforcement action, Armstrong and Grewal responded in a YouTube video.
- Separately, Coinbase started an advocacy campaign called Stand With Crypto seeking to mobilize public support for crypto rules.
Between the lines: "There are limited circumstances to have a proactive, public-facing media strategy," Junaid Zubairi, a lawyer at Vedder Price specializing in government investigations and white-collar defense, tells Axios.
- In situations where there's no precedent or case law, a company may want to drum up support, Zubairi says.
- "There are advantages in speaking out and creating a public issue, so others can be aware and support the defense."
What we're watching: The SEC ultimately sued Coinbase in June.
- The case reads as potentially existential for the company. In that light, it could be that its executives see no other choice than to come out swinging.
Go deeper: SEC chair Gary Gensler's court losses are piling up in crypto
