Coinbase Is Backing Ripple Against the SEC

America's largest crypto exchange is getting more and more vocal with its support for industry peers engaged in legal battles with the SEC.

By Andrew Asmakov

4 min read

Coinbase is backing yet another crypto firm, adding more pressure from the crypto industry on the SEC.

It is almost two years since Ripple Labs, the company which develops the Ripple payment protocol, has been fighting the high-profile lawsuit filed by the Securities and Exchange Commission (SEC).

The growing army of Ripple backers now looks even stronger after the U.S. largest crypto exchange Coinbase moved to get regulatory approval to help the firm in its battle against the Commission.

The case revolves around alleged violations for selling its XRP token as an unregistered security.

The lawsuit, filed in December 2020 against Ripple Labs, as well as co-founder Christian Larsen and CEO Brad Garlinghouse, alleges that the company has raised $1.3 billion in unregistered securities offerings since 2013.

Amid some recent positive news for Ripple Labs and speculations that the SEC is likely to lose the case, the company also gained support from several organizations and individuals, including the Blockchain Association and Rhode Island attorney John Deaton.

In a Monday petition with the District Court for the Southern District of New York, Coinbase asked Judge Analisa N. Torres for permission to file an amicus brief in support of Ripple’s legal position in the case.

Amicus briefs are legal documents supplied to a court of law containing advice or information relating to a case from an organization or an individual who isn't a party to a case and acts as “a friend” of the court.

Citing its “unique perspective on the issues at stake in this matter” and “the absence of a regulatory framework governing digital assets,” Coinbase said it “believes that parties like Ripple must be permitted to pursue fair notice defenses in matters where they are facing surprise enforcement actions like this one.”

According to Coinbase, one of the fundamental due process protections guaranteed by the Constitution is that “government agencies cannot condemn conduct as a violation of law without providing fair notice that the conduct is illegal.”

“By suing sellers of XRP tokens after making public statements signaling that those transactions were lawful, the SEC has lost sight of this bedrock principle,” reads the filing.

Coinbase also argued that most digital assets traded on the exchange do not represent ownership stakes or pay returns to investors in the way shares in public companies may do.

“Existing SEC registration requirements for national securities exchanges are currently unsuitable to the way digital asset platforms operate," said Coinbase, adding that “the end result is extraordinarily costly to U.S. innovation in this new industry.”

Coinbase backs broader crypto industry

Coinbase’s amicus brief in the Ripple case comes two weeks after the exchange threw its weight behind Grayscale, the operator of the Grayscale Bitcoin Trust (GBTC), in its legal battle with the SEC over the regulator’s refusal to approve the company’s application to launch a Bitcoin ETF.

At that time, Coinbase claimed that restricting Bitcoin spot ETFs from entering the U.S. market “unjustifiably limits investor choice,” and further argued that the SEC is “engaging in an arbitrary and capricious practice of picking winners and losers among investment products.”

And back when Tornado Cash fell under hefty American sanctions, Coinbase also funded a joint lawsuit against the U.S. Department of Treasury.

"Sanctioning open source software is like permanently shutting down a highway because robbers used it to flee a crime scene," Coinbase CEO Brian Armstrong wrote in a blog post about the lawsuit. "It's not the best way to solve a problem. It ends up punishing people who did nothing wrong and results in people having less privacy and security."

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