Coinbase CLO: “SEC Interpretation of Investment Contract Violates the Law”

As Coinbase’s filing awaits a response from the SEC, its Chief Legal Officer has stirred things up.

Gery Gensler leaning on the shoulder of Paul Grewal.
Created by Gabor Kovacs from DailyCoin
  • Coinbase is locked in a legal battle with the SEC.
  • The firm has revealed its intent to dismiss the case.
  • As Coinbase’s filing awaits a response from the SEC, its Chief Legal Officer has stirred things up.

On June 6, The United States Securities and Exchange Commission filed a lawsuit against Coinbase as part of its barrage of crypto enforcement actions, accusing the company of failing to register as a securities exchange.


On June 28, the crypto exchange responded to the SEC’s complaint asserting that the regulator had no jurisdiction over crypto exchanges and revealing its intent to seek dismissal. As the case awaits the regulator’s response, Coinbase’s Chief Legal Officer Paul Grewal has stirred things up by reiterating the crypto exchange’s stance that the SEC is violating the law.

Grewal Calls Out SEC’s “Untethered” Crypto Stance

In a Twitter thread on Tuesday, July 4, Grewal accused the SEC of violating the law by interpreting “investment contract” in crypto enforcement cases.

The Coinbase CLO noted that he arrived at this conclusion by comparing the SEC’s claim of jurisdiction over crypto markets to the Secretary of Education’s claim that the HEROES Act granted him the power to cancel student debt in the Biden v. Nebraska Supreme Court case related to the forgiveness of student loans. 

According to Grewal, however, the SEC’s claim was “far worse,” arguing that the significance was staggering and “untethered to the fundamental requirement that there be enforceable rights between enterprise and purchaser.”

On June 30, in line with the major questions doctrine, the Supreme Court ruled in the Biden v. Nebraska case, holding in a 6–3 vote that the Secretary of Education did not have clear Congressional authority to waive student loans under the HEROES Act.


The major questions doctrine posits that in cases affecting a significant portion of the economy and lacking clear Congressional statutes, the court should yield deference to Congress, not the agency’s interpretation of existing statutes.

In its response to the SEC’s complaint, Coinbase had notably raised the major questions doctrine, arguing that the SEC was stretching the definition of “investment contract” to assert jurisdiction over the nascent market and lacked clear Congressional authority.

On the Flipside

  • The SEC is yet to respond to Coinbase’s arguments.

Why This Matters

Coinbase Chief Executive Officer Brian Armstrong had asserted that the exchange was willing to fight the SEC case in the Supreme Court. Grewal’s statements suggest that Coinbase is confident of its chances should the case reach the Supreme Court. 

Read this to learn more about Coinbase’s arguments against the SEC’s complaint:

Coinbase Hunts Dismissal of “Neither Prudent nor Lawful” SEC Lawsuit

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This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Okoya David

David Okoya is a crypto news reporter at DailyCoin based in Nigeria. He covers various topics related to the cryptocurrency industry, including exchanges, regulations, and price movements, and strives to bring fresh angles to breaking news. With experience as a freelance crypto news writer, David upholds the highest journalistic standards, telling complete stories and answering lingering questions whenever possible.