Monday, May 20, 2024

Paul Grewal, Chief Legal Officer (CLO) at Coinbase, a major cryptocurrency exchange based in the U.S., has leveled accusations against the U.S. Securities and Exchange Commission (SEC). He claims that the SEC’s definition of an investment contract, which they use to classify certain cryptocurrency assets as securities, contravenes existing laws.

Grewal criticizes SEC’s ‘Investment Contract’ Interpretation

Grewal has expressed strong objections to the way the U.S. Securities and Exchange Commission (SEC) identifies some digital assets as securities. He believes that the SEC’s method of defining what qualifies as an investment contract is incorrect and breaches current laws.

He said:

The SEC’s definition of ‘investment contract’ breaks the law.

Moreover, Grewal claims that the SEC’s approach not only breaks the law but also exceeds its authority by asserting jurisdiction over all cryptocurrency assets identified as securities. He elaborated:

The ‘economic and political significance’ of falsely claiming jurisdiction over all digital assets, excluding BTC, is not merely ‘astounding,’ but unattached to the basic requirement for enforceable rights between a business and its purchaser.

Grewal bases his arguments on a thorough analysis of the Supreme Court of the United States’ (SCOTUS) judgment in the Biden v. Nebraska case. In this case, the court overturned the Biden administration’s $430 billion student loan forgiveness program.

The Major Questions Doctrine

Grewal suggests that the rationale for invoking the major questions doctrine in the Biden v. Nebraska case could be applied to Coinbase’s situation. The exchange is currently fighting SEC allegations of operating as an unregistered broker and committing securities violations.

As per Harvard Law School professor Noah Feldman, the major questions doctrine proposes that “if the executive branch does something the court considers really big and really new, then the court will check whether Congress actually approved it. In the absence of explicit congressional authority, the court will reject it.”

Coinbase has included the major questions doctrine in its recent legal filing against the SEC’s complaint. They argue that any new interpretation of securities law by the SEC should be dismissed unless Congress first sets standards regarding digital assets.

Grewal further emphasized this point, stating:

It’s not only that Congress can set standards by theoretically passing legislation in the future, they’re actively striving to do so at this moment. This isn’t even a close call.

What are your thoughts on the allegations made by Paul Grewal, Coinbase’s CLO? Share your views in the comment section below.

Frequently Asked Questions (FAQs) about SEC’s ‘Investment Contract’ Interpretation

Who is Paul Grewal and what position does he hold at Coinbase?

Paul Grewal is the Chief Legal Officer (CLO) at Coinbase, one of the largest cryptocurrency exchanges based in the U.S.

What is Grewal’s accusation against the SEC?

Paul Grewal accuses the U.S. Securities and Exchange Commission (SEC) of violating the law by improperly defining what constitutes an ‘investment contract,’ a term used to classify certain digital assets as securities.

What is the basis of Grewal’s argument against the SEC’s interpretation?

Grewal’s argument is based on the Supreme Court of the United States’ (SCOTUS) ruling in the Biden v. Nebraska case. He believes the rationale for applying the major questions doctrine in that case can also apply to Coinbase’s current situation, where the SEC has accused the exchange of operating as an unregistered broker and committing securities violations.

What is the major questions doctrine?

The major questions doctrine is an idea that suggests if the executive branch does something the court considers really big and new, then the court will check whether Congress actually authorized it. Without clear congressional authority, the court will reject it.

How has Coinbase responded to the SEC’s complaint?

Coinbase has invoked the major questions doctrine in its recent legal filing against the SEC’s complaint. They argue that any new interpretation of the securities law by the SEC should be dismissed unless Congress first sets standards concerning digital assets.

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6 comments

SECWatchdog July 6, 2023 - 10:46 pm

Grewal’s got a point, the SEC might be overstepping. But will the court see it that way? Only time will tell.

Reply
BitLord76 July 7, 2023 - 2:58 am

didn’t realize how much of a legal quagmire this all is. just thought it’s about buying low and selling high.

Reply
CryptoJunkie23 July 7, 2023 - 8:22 am

Whoa, this is big news! Looks like coinbase ain’t backing down. Fight the good fight, Grewal!!

Reply
LawLover July 7, 2023 - 8:40 am

Interesting use of the major questions doctrine. If Congress steps in, things might change for crypto. Fingers crossed!

Reply
FutureMoney101 July 7, 2023 - 3:30 pm

Gotta love how complex crypto’s become. ‘investment contracts’ lol. I just wanna buy some bitcoin…

Reply
DecentralizeEverything July 7, 2023 - 5:17 pm

Typical. Government trying to control crypto, ain’t gonna work. We’re decentralized for a reason! power to the people.

Reply

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