Coinbase Wins Partial Victory as Judge Orders SEC to Provide Key Documents

Key Insights:

• The judge ordered the SEC to release documents on crypto tokens but rejected the subpoena for Chair Gary Gensler.
• Coinbase secures access to key SEC documents, but limits remain on the scope of the discovery.
• SEC must provide more documents in the Coinbase case, though Gensler’s communications are excluded.

A federal judge in New York has issued a mixed ruling in the ongoing legal battle between the U.S. Securities and Exchange Commission (SEC) and cryptocurrency exchange Coinbase. US District Judge Katherine Polk Failla granted certain parts of Coinbase’s motion to compel the SEC to provide documents relevant to the case but rejected other requests, including the subpoena of SEC Chair Gary Gensler.

The decision comes amid a broader lawsuit filed by the SEC, accusing Coinbase of operating its platform without proper registration. This lawsuit, initiated in 2023, has led to a discovery phase where Coinbase seeks to acquire documents from the SEC to aid its defense. Coinbase’s attempts to compel additional documentation and statements from Gensler have been a key point of contention.

SEC Ordered to Provide Some Documents, But Gensler Subpoena Rejected

Coinbase’s original motion included a broad request for documents, particularly focusing on those related to the SEC’s evaluation of various cryptocurrency tokens under the Howey Test—a legal standard used to determine whether certain assets qualify as securities. Coinbase also sought documents connected to the SEC’s approval of its public listing in 2021 and requested that Gary Gensler testify and provide personal communications.

Judge Failla, in a ruling dated Thursday, decided to grant Coinbase access to certain SEC documents, which could prove crucial to the exchange’s defense. However, the judge rejected Coinbase’s request to subpoena Gensler for testimony or personal communications.

Coinbase had initially sought documents dating back to 2017, including Gensler’s private emails. However, this request was narrowed to only cover his time leading the agency after he assumed office in 2021.

Paul Grewal, Coinbase’s Chief Legal Officer, said the company withdrew the request for Gensler’s communications after the SEC assured the court that Gensler had not used personal communication channels for SEC business. “The SEC has represented, under penalty of perjury, that Gary Gensler has not used any personal communication channels to conduct SEC business,” Grewal stated, explaining why the request was no longer pursued.

Document Production Narrowed but Key Information Granted

Coinbase had sought broader access to documents from a variety of SEC leadership and staff, including current and former SEC commissioners. The SEC had originally offered to provide documents from only five of its staff members, which Coinbase argued was insufficient. 

Judge Failla agreed that more documents should be produced but did not grant Coinbase’s full request for additional personnel. The judge specifically excluded current and former commissioners from the search, reducing the scope of individuals whose communications must be examined.

The judge also ruled that the SEC would not have to turn over internal documents unless they included external attachments. Despite this limitation, Coinbase’s legal team viewed the ruling as a victory in pursuing evidence related to the SEC’s application of the Howey Test to the tokens in question. 

Grewal noted that the court’s order would result in Coinbase obtaining critical discovery that could strengthen its legal defense. He described the ruling as a significant step forward in uncovering the SEC’s internal deliberations.

SEC Granted Permission to File Certain Redactions Under Seal

Judge Failla also ruled in favor of the SEC’s request to permanently file some documents under seal, allowing redactions for sensitive information. While the exact contents of these redactions remain unknown, it is expected that these documents will contain confidential or proprietary information that the SEC deems too sensitive for public release. This is a common practice in litigation involving regulatory bodies and financial entities.

Coinbase’s Grewal emphasized that the ruling would still allow them access to key documents. “While it may be the case that we withdrew one particular request, and the judge recognized certain reasonable limits, this was an order granting the heart of the discovery that we have been seeking for months,” Grewal stated in an interview, reiterating that Coinbase remains optimistic about its legal strategy going forward.

The SEC’s lawsuit against Coinbase, which dates back to 2023, accuses the cryptocurrency exchange of offering securities without proper registration. Coinbase, in its defense, has argued that the SEC has not provided clear regulatory guidelines for the cryptocurrency industry and that the tokens traded on its platform should not be classified as securities.

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