Coinbase stands as an ally for Ripple’s case against US SEC

Crypto exchange Coinbase made a shocking move to support Ripple Labs’ bid in their ongoing case against the United States’ Securities and Exchange Commission. This is an effort to show the SEC that it cannot have its way against all crypto exchanges and providers all the time.

Ripple’s case with the SEC concerns the crypto’s holdings and earnings being linked to illegal activities. The crypto industry has always been associated with this kind of report, but it is hard to say that the SEC has any jurisdiction over these situations since crypto is decentralised.

SEC has already called for an immediate ruling on whether XRP did violate any securities laws since it entered the industry. However, the court is yet to come up with a final ruling since they are still conducting hearings to collate evidence to prove which side speaks the truth. With Coinbase’s backing, Ripple now stands a chance to avoid being persecuted wrongly.

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Coinbase’s move was a big statement

Coinbase’s petition to the federal court sees them join various groups such as the Blockchain Association, SpendTheBits and lawyer John Deaton, who all hope to shore up Ripple’s case against the SEC. Coinbase files a ‘friend of the court’ brief in an effort to support Ripple Labs’ claim on the said matter, which should shine some light on their defence.

The SEC sued Ripple by the end of 2020 with the allegations that the company sold XRP as an unregistered security. However, Coinbase claimed that there was no fair notice before moving forward with its enforcement action. The common law states that the regulator must provide clear guidance to businesses in the industry before pushing with the said process.

‘Given the absence of SEC rulemaking for the cryptocurrency industry, the question of whether the SEC has given fair notice before bringing an enforcement action against sales of one of the thousands of unique digital assets will often be highly fact-intensive’, Coinbase's filing said.

The inconsistent enforcement by the SEC

Coinbase argues that the SEC has been inconsistent in enforcing the law especially when it comes to companies that provide various financial services that can be used to play Bitcoin casino games in Gamdom, for instance. This creates huge uncertainty for companies in the sector. Ripple and other companies have been the subject of scrutiny, and Coinbase claims that there are others with almost the same products and services that have been subject to none.

Much of Coinbase’s filing is focused on this argument. They are pushing for a view that the regulator has not made any move nor engaged in any way to provide the regulatory clarity that companies want. Coinbase also insisted that cryptocurrency can be treated like traditional securities since most do not have any ownership stakes or even pay dividends the way shares might work.

Until the coast is clear, Ripple and many other crypto remain under the threat of the SEC’s unwarranted judgement. This is why Coinbase and other groups are keen to show the world that it is not fair for the SEC to boss them around and put other companies under their watch.

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Words: Paul Daniel Flores