In Webinar With Coinbase Chief Legal Officer Paul Grewal, Partner Stephen Palley Discusses SEC’s Approach Toward Crypto

Partner Stephen Palley participated in a recent webinar that included Coinbase’s Chief Legal Officer Paul Grewal. The webinar was sponsored by the Regulatory Transparency Project (RTP).

Moderated by George Mason University professor J.W. Verret, the panelists discussed the U.S. Securities and Exchange Commission’s (SEC) recent lawsuit against crypto exchange Coinbase and Coinbase’s separate lawsuit against the SEC seeking mandamus relief for failing to respond to a rulemaking petition.

The Aug. 16 webinar, which also aired on RTP’s Fourth Branch Podcast, examined the influence the Coinbase lawsuit will have on the legal landscape of crypto asset trading and securities laws into the future.

The SEC and Coinbase are suing each other after the federal regulator warned the San Francisco-based company in March that it was operating illegally by offering and selling unregistered securities.

On Aug. 4, Coinbase asked a federal judge in Manhattan to dismiss the SEC’s case against it, alleging the regulator is stepping well outside of its jurisdiction in suing the crypto exchange because it does not trade securities. Earlier this year, the Third Circuit Court of Appeals ordered SEC to provide an update to the Court and Coinbase about its expected timing on resolving Coinbase’s rule-making Petition.

During the webinar, the panelists discussed how the Coinbase lawsuit raises broader questions about the SEC’s operations and the applicability of U.S. securities laws to digital assets.

Courts have recently shown a greater willingness to scrutinize delegated authority to agencies. Palley said this makes some of Coinbase’s claims potentially stronger than they might have been 10 or 20 years ago, given changing ideological perspectives in the Supreme Court in particular.

He added that regulatory clarity from the SEC about the status of digital assets as securities could be beneficial to the SEC and to the industry.