Coinbase Looks to Polarizing Supreme Court to Rein in SEC

Amid its legal case against the SEC, Coinbase’s legal expert looks to recent Supreme Court decisions for defense.

Gary Gensler in court, sun is shining through the windows and judges are sitting around.
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  • Coinbase executive points to recent Supreme Court case argument against SEC. 
  • The SEC recently made a string of polarizing rulings. 
  • While there are crypto-friendly candidates in both parties, one leans more in favor. 

As the political discourse around the US Supreme Court becomes more divisive, many are looking for broader implications of its decisions. Recently, Paul Grewal, the Chief Legal Officer of Coinbase, one of the world’s largest cryptocurrency exchanges, has turned to the Supreme Court’s latest decision to challenge the SEC’s broad interpretation of digital assets.

Coinbase’s CLO Points to Supreme Court’s Decision

On Tuesday, July 4, Paul Grewal, the Chief Legal Officer at Coinbase, made an argument against the SEC interpretation of “investment contract” in relation to digital assets. 

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Grewal’s argument hinges on the Major Questions Doctrine, a legal principle recently upheld in a Supreme Court case on student loan forgiveness. This legal principle prevents agencies from making decisions of major significance without clear congressional authorization.

“Swap out ’Secretary’ for ‘Chair,’ ’digital asset’ for ‘student loans,’ and there is no conclusion but one: the SEC’s interpretation of ‘investment contract’ violates the law,” Grewal exclaimed. 

“Actually, it’s far worse,” Grewal added. He further argues that the SEC’s claim of authority over all digital assets, except Bitcoin, is even more significant. 

Grewal’s arguments suggest that Congress should address this issue through legislation instead of leaving regulation up to the SEC. 

Supreme Court’s Polarizing Decisions

This appeal to the Supreme Court comes after a string of controversial and polarizing decisions. Critics on the left have been vocal about the perceived conservative bent of these rulings. 

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For instance, the Supreme Court recently ruled in favor of a Christian web designer who refused to create websites for same-sex weddings due to religious objections. Some have criticized this decision for potentially undermining LGBTQ rights. 

The court’s decision to end affirmative action programs at Harvard and the University of North Carolina has also drawn backlash. 

The court’s recent rulings on voting rights and abortion have sparked heated debates nationwide. However, how the current Supreme Court might rule on crypto is not entirely clear.

Democrats or Republicans: Who Is More Crypto-Friendly? 

Republicans, in general, have expressed more openness to crypto and blockchain technology. This is due to their preference for a small government and financial deregulation. This aligns with cryptocurrencies’ decentralized and permissionless nature, which operate independently of a central authority.

It’s also worth noting that politicians on both sides of the aisle are pro-digital currencies. For example, Rep. Thomas Massie, a Republican, and Governor Jared Polis, a Democrat, have both shown support for digital currencies. So has Andrew Yang, a former Democratic presidential candidate. 

On the Flipside

  • Coinbase argues that treating crypto as securities will hurt innovation and make the US less competitive.  
  • On June 8, Coinbase’s CEO Brian Armstrong stated he would be willing to fight the SEC up to the Supreme Court. 

Why This Matters

Coinbase’s appeal to the Supreme Court highlights the growing tension between the crypto industry and regulatory bodies like the SEC. 

Read more about Coinbase’s case against the SEC: 

Coinbase CEO Willing to Fight SEC in Supreme Court

Read more about how to protect yourself from spear-phishing: 

Coinbase User Loses $4.2M to “Spear Phishing:” How to Spot It

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.

Author
David Marsanic

David Marsanic is a journalist for DailyCoin who covers the intersection of crypto, traditional finance, and government. He focuses on institutionalized crypto entities like major cryptocurrency exchanges and Solana, breaking down complex topics into easy-to-understand writing. David's prior experience as a business journalist at various crypto and traditional news sites has enabled him to maintain a critical approach to news while adhering to high journalistic integrity standards.