Coinbase SEC puts in notice: ‘Liability should not depend on the judgment in which court you are charged’

Coinbase has filed a notice in its ongoing legal battle with the US Securities and Exchange Commission (SEC), citing a recent court ruling against Binance.

Late last month, in SEC v. Judge Jackson's ruling in the case of Binance Holdings Limited dismissed the SEC's claim that the BNB token was used for investment contracts on the Binance platform.

In a letter to U.S. District Judge Catherine Polk-Faila on Monday, lawyers representing Coinbase argued that the Binance decision shows inconsistencies in how courts apply the Hawaii test to crypto.

The letter states that the SEC's position deviates from the established Hawaii framework, which traditionally guides the definition of what is considered a security.

This conflict, Coinbase said, emphasizes the importance of reviewing appeals to provide clear regulatory guidance. The SEC is taking legal action against Coinbase, saying that some activities on its platform constitute securities transactions.

As market participants and legal experts demand consistent and clear regulatory guidelines, the diversity of court decisions highlights the regulatory challenges facing the crypto industry.

Binance's decision on June 28 followed the precedent set by Ripple last year, where Judge Jackson said that US courts had reached the opposite conclusion on similar digital asset transactions.

In July 2023, a court ruled that Ripple's XRP token was not a security when sold to the public on an exchange, but could be considered a security when sold to institutional investors.

Those inconsistencies, the letter said, leave market participants facing different rules depending on the jurisdiction.

“Liability should not depend on which court you are sued in or which judge is assigned to your case,” Coinbase Chief Legal Officer Paul Grewal wrote in a statement Monday. Xformerly of Twitter.

Grewal also noted that the SEC's litigation-focused approach to crypto regulation has resulted in scattered legal standards nationwide, echoing previous comments from the likes of MetaMask parent Binance and Consensys.

Days before the Binance ruling, Coinbase, in partnership with History Associates Incorporated, Filed a civil case Against the SEC and the Federal Deposit Insurance Corporation (FDIC) for failing to comply with Freedom of Information Act requests.

The requests sought disclosure of documents, including “pause letters” sent to financial institutions urging them to cease crypto-related activities.

The FDIC and SEC cited these documents as various exemptions, prompting Coinbase to take legal action.