Regulation

CFTC Pushed By Coinbase To Match US SEC’s Document Disclosure

Published

3 months ago

October 1, 2024

Coinbase has filed a motion to compel the U.S. Commodity Futures Trading Commission (CFTC) to produce communications with issuers of 12 tokens named in a related lawsuit brought by the Securities and Exchange Commission (SEC).

The cryptocurrency exchange wants this information to help it in a lawsuit that is ongoing in the Southern District of New York (SDNY). This follows a previous order by the court to the SEC to produce similar documents that Coinbase has said are crucial for the case.

Coinbase Seeks CFTC Compliance Following SEC Lawsuit

Coinbase’s motion comes after a court ordered the SEC to produce records of communications between the US SEC and the issuers of the 12 tokens in question. The SEC has accused Coinbase of listing these tokens without meeting the necessary requirements to be a securities exchange and states that the assets are unregistered securities under the Howey Test.

According to the exchanges CLO Paul Grewal, they disputes this, saying that the Commodity Futures Trading Commission has also been in touch with the token issuers and that these documents may be relevant to deciding whether the assets are investment contracts.

Today, @Coinbase filed a narrow motion in DDC to compel @CFTC to produce communications between the agency and the 12 token issuers named in our @SECGov enforcement suit. These are the same types of comms that the SDNY already granted against the SEC. Basic due process requires…
— paulgrewal.eth (@iampaulgrewal) October 1, 2024

Consequently, the exchange wants the same cooperation from the CFTC, referring it to their defense. According to Coinbase, these communications are important for understanding the development, use, and functionality of the tokens, which are important factors for determining whether they are securities.

During this move, the cryptocurrency exchange has requested the SEC to issue a clear legal framework for digital assets stating that the current securities laws are not applicable to the crypto space.

CFTC Faces Pushback After Refusing to Comply

Coinbase’s latest legal action against the Commodity Futures Trading Commission is in response to the agency’s failure to honor a subpoena that was issued in June 2024. The subpoena sought information on documents and communication between the Commodity Futures Trading Commission and the issuers of the 12 tokens named in relation to the tokens.

According to Coinbase, such information from the third parties is critical to its defense and may shed light on whether the tokens are securities as per the CFTC’s communications with them.

Despite the exchange’s efforts to narrow the scope of its request, the CFTC has resisted, citing concerns about relevance, burden, and privilege. The agency has yet to conduct any searches for the requested documents. Coinbase, as a result, pushed back, offering to cover the costs of searching and reviewing the materials, and arguing that the burden on the CFTC is reasonable given the significance of the case.

In the midst of its ongoing legal challenges, the exchange announced a scheduled system upgrade that will temporarily affect its platform. The upgrade is planned for Saturday and several services, including Simple and Advanced Trade, will be unavailable among others.