A new development has materialised in the ongoing legal battle between Coinbase and the US Securities and Exchange Commission (SEC).
Coinbase is pressing for access to personal emails of SEC Chair, Gary Gensler, claiming they could hold crucial information on the SEC’s stance on cryptocurrency regulations.
This demand is part of Coinbase’s broader strategy to gather evidence for a fair notice trial.
The cryptocurrency exchange argues that these emails might reveal Gensler’s personal views and interpretations of crypto regulations, which are essential for their defence in the upcoming trial.
In a letter dated 3 July, Coinbase’s legal team urged US District Judge, Katherine Failla, to grant them access to Gensler’s emails.
The team stressed, “These communications might reveal Gensler’s personal views and interpretations of crypto regulations”.
They believe that inconsistencies in Gensler’s public statements and personal communications could demonstrate that Coinbase lacked fair notice of regulatory expectations.
Coinbase’s attorneys emphasised that Gensler’s public statements and speeches, both in his official and personal capacities, could show inconsistencies or lack of clarity in the SEC’s approach to crypto.
SEC’s resistance to disclosure
In response, the SEC has now filed a rebuttal with the US District Court for the Southern District of New York, arguing against Coinbase’s request.
The SEC described Coinbase’s demand as a misinterpretation of disclaimers in Gensler’s public speeches, which state that his views are personal and not representative of the Commission’s official stance.
The regulator argued, “Coinbase’s discovery requests are overly broad, seeking irrelevant material that is disproportionate to the needs of the case”.
They asserted that this disclaimer does not imply Gensler was speaking in a purely private capacity nor does it justify the intrusive access Coinbase seeks to his personal communications.
The SEC emphasised that public speeches by Gensler, even when delivered in unofficial settings, are related to his role as SEC Chair and not merely personal opinions.
The agency contended that examining Gensler’s personal emails is unlikely to provide relevant information for Coinbase’s defence.
The SEC added, “Any insights Gensler might have shared informally, such as at social events or academic settings, would not substantiate Coinbase’s claims of inadequate regulatory notice”.
The agency also pointed out that they have already produced over 240,000 documents and are searching another 117,000 for responsive material.
They stated, “This additional sweeping discovery, including all SEC internal and external emails about the application of securities laws to digital assets, is not relevant to the Howey analysis or fair notice defence that will decide the case”.
Furthermore, the SEC argued that producing three million additional documents would be “disproportional to the requirements of the case”.
They emphasised, “The burden of searching and producing or logging, one by one, an additional three million irrelevant external or assuredly privileged internal SEC documents that Coinbase’s limitless request entails is thus entirely disproportional to the needs of the case”.
Broader implications
The SEC’s legal battle with Coinbase began in June 2023, when the SEC charged Coinbase with operating as an unregistered securities exchange, broker, and clearing agency. Coinbase has vigorously contested these allegations.
In March, the exchange sued the SEC for refusing to engage in crypto rule-making, claiming it hindered the industry’s development.
Coinbase Chief Legal Officer, Paul Grewal, has been vocal about the need for transparency, saying that it is “necessary to show the record of the SEC’s inconsistent views of digital assets and its own regulatory reach”.
In a 6 August post made on X, he argued, “If the SEC is going to engage in an unprecedented regulation by enforcement campaign, the least they owe to those they target – and the public – is transparency”.
In April and June, Coinbase submitted requests for documents, including those related to Gensler’s communications before his tenure as SEC Chair began in April 2021.
In July, Coinbase’s legal team again urged US District Judge Katherine Failla to grant them access to Gensler’s emails, arguing that the communications might reveal Gensler’s personal views on crypto regulations.
The SEC maintains that it has more than satisfied its discovery obligations and contends that further document production would be disproportionate to the needs of the case.
As the legal battle continues, both sides remain firmly entrenched in their positions.
The outcome of this dispute is expected to have significant implications for the regulatory landscape of the cryptocurrency industry in the United States.
