Coinbase CEO Challenges SEC, Calls for End to “Frivolous” Lawsuits and Apology to Americans

Coinbase CEO Brian Armstrong has urged the upcoming U.S. Securities and Exchange Commission (SEC) chairman to halt all “frivolous” lawsuits against cryptocurrency companies and issue an apology to American citizens. Armstrong has also criticized the SEC for its inconsistent definitions of crypto assets.

The next SEC chair should withdraw all frivolous cases and issue an apology to the American people. It would not undo the damage done to the country, but it would start the process of restoring trust in the SEC as an institution.

Armstrong posted a chart highlighting various statements from SEC officials, including a 2018 quote from former Commissioner William Hinman, who said that digital assets cannot be clearly classified as securities. This statement has been pivotal in Ripple Labs‘ defense against the SEC.

Timeline of the Coinbase vs. SEC Conflict

The conflict between Coinbase and the SEC has spanned several years. In March 2023, Coinbase received a notice from the SEC about potential enforcement action due to alleged violations of securities laws. This notice concerned specific crypto assets on the platform, such as Coinbase Earn, Coinbase Prime, and Coinbase Wallet.

In April 2023, Coinbase filed a lawsuit against the SEC to compel the commission to respond to a request for new cryptocurrency regulations. The SEC sought to dismiss the lawsuit, arguing it was not obligated to respond promptly. By June 2023, the regulator had filed its lawsuit against Coinbase, targeting Coinbase, Inc. and Coinbase Global, Inc., but excluding Armstrong and other executives.

The SEC also charged Coinbase for failing to register the offer and sale of its crypto asset staking-as-a-service program.

Since then, the standoff has escalated, with Coinbase filing multiple motions for partial summary judgment. However, the conflict remains unresolved.

Gary Gensler’s Tenure and Potential Job Loss

There has been ongoing tension between the SEC and the crypto community, which has intensified since Gary Gensler’s appointment as SEC chairman. Discussions about his potential resignation have surfaced, especially with the upcoming presidential election in 2024. While Gensler’s term officially ends in January 2026, changes in presidential administration often lead to shifts in SEC leadership.

If Kamala Harris wins the election, a new SEC head is anticipated. Conversely, a Donald Trump victory is expected to bring significant regulatory changes favoring the crypto industry. This leadership change could mark a new era for the American cryptocurrency market, fostering a more transparent regulatory environment.

Crypto Community’s Discontent with Gensler

Under Gensler’s leadership, the crypto industry has faced increased scrutiny and pressure. Not all measures taken by the SEC are deemed justified. The lack of clear rules for determining the status of digital assets has led the SEC to rely on its own interpretations. Gensler has controversially stated that all cryptocurrencies, except Bitcoin, could be considered illegally issued securities.

Based on this stance, Gensler compiled a “blacklist” of digital assets, including 68 cryptocurrencies deemed unlawfully issued securities. Notably, Ethereum was excluded from this list, though the reasons remain unclear.

Trump’s Potential SEC Head and a Crypto-Friendly Future

Rumors have circulated about potential candidates for the SEC chairmanship if Trump wins the 2024 election. Dan Gallagher, currently the Chief Legal Officer at Robinhood and a former SEC commissioner, is a leading candidate. Gallagher’s experience within the SEC and his work in a Republican administration supporting Trump make him a favorable choice for the crypto community.

Rumors are floating that Dan Gallagher might replace Gensler in a Trump administration. Gallagher is the Chief Legal Officer at Robinhood and has served as an SEC commissioner during Obama’s term. Like this post if you think Gallagher will be pro-crypto if elected.

Gallagher’s extensive experience and familiarity with the SEC’s internal processes position him as a potential advocate for more crypto-friendly policies. If appointed, he could initiate changes that turn the U.S. into a more accommodating environment for cryptocurrency innovation and investment.

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