In the latest legal salvo between the Securities and Exchange Commission and Coinbase, lawyers for the regulator have complained the crypto exchange is “overreaching” in its efforts to subpoena emails from its chairman, Gary Gensler.
Court documents filed on Monday show the SEC is claiming Coinbase’s request for further documents and evidence is “disproportional” to the needs of the case.
“It is the Court’s analysis of the facts and the law, not the SEC’s internal discussions or discussions with market participants, that will decide this case, and Coinbase fails to cite a single case to the contrary,” the document reads.
The regulator argues there is no precedent that internal discussions between Gensler and other SEC members and outside organizations would support Coinbase’s defense.
The SEC also argues it has already provided over 240,000 documents relevant to Coinbase. It alleges the company has failed to explain the relevance of the additional documents it seeks and that to provide those additional documents, the SEC claims it would need to log and process another three million documents, effectively every piece of material in any way related to crypto assets.
Given the SEC is “likely to assert privilege” with most of those documents, they would need to be logged manually in a process that would far exceed the 400 hours the SEC claims it has already spent.
"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," per the document.
The legal battle between the two began when the SEC sued in June 2023, arguing that Coinbase operates an unregistered securities exchange, broker, and clearing agency.
Coinbase argues the SEC is overstepping its regulatory authority and has failed to provide clear guidelines on what constitutes security in the first place.
The company claims the SEC’s documents will demonstrate this lack of clarity.
At the start of July, a US judge said that Coinbase’s justifications for the subpoena were unimpressive and the “reservoir of credibility” that the company had built up had been drained. Despite this finding, gaining access to these documents was a “critical” part of the motion Coinbase filed in late July, as reported by Decrypt.
Elsewhere, late last week, Coinbase reported $1.4 billion in Q2 revenue, citing “improving regulatory clarity” for supporting innovation in the crypto industry.
The SEC and Coinbase have not yet responded to requests for comments.
Edited by Sebastian Sinclair