History Associates Inc., a research firm hired by Coinbase, has filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corp. (FDIC). The lawsuit accuses these regulatory bodies of withholding documents that could clarify their stance on cryptocurrencies.
SEC’s Recent Review and FOIA Exemption
Coinbase contends that the requested documents, which should be accessible under the Freedom of Information Act (FOIA), would provide insight into how the regulators perceive digital assets, including Ethereum’s ether (ETH).
The lawsuit follows the SEC’s recent closure of its review of “Ethereum 2.0,” indicating there are no current enforcement concerns that might justify withholding related documents.
Despite this, the SEC has invoked FOIA’s “exemption 7A”—a provision that protects information which could jeopardize law enforcement activities—to deny requests for information on both old cases and the recently concluded ETH inquiry.
At the heart of the legal challenge are documents related to three closed cases and advisory communications known as “pause letters.” These letters, reportedly sent by the FDIC’s inspector general to financial institutions, advised halting crypto-related activities.
The lawsuit against the FDIC claims these letters represent a broader attempt by financial regulators to isolate digital asset companies from the banking system.
One of the contested cases involves Zachary Coburn, the founder of EtherDelta, a platform that facilitated ether trading. In 2018, the SEC categorized the platform’s activities as dealing in “digital asset securities.”
Another case concerns Enigma MPC, a blockchain startup that raised $45 million in 2017 through the sale of ENG tokens, which the SEC later deemed unregistered securities.
Coinbase’s Response and Criticism
Coinbase’s Chief Legal Officer, Paul Grewal, expressed frustration over the SEC’s lack of transparency in a statement originally posted on X (formerly Twitter).
Grewal criticized the SEC for not releasing documents related to closed investigations that could reveal the extent of its regulatory reach, which Coinbase views as overly broad and unlawful.
He emphasized that these investigations included scrutiny of ETH, which the SEC publicly stated was not a security in 2018, and other cases that had been concluded for several years.
The lawsuits are part of a broader series of disputes between Coinbase and U.S. financial regulators, marking a significant phase in the ongoing tension between the cryptocurrency exchange and regulatory authorities.
Notably, Coinbase is involved in a high-profile lawsuit with the SEC over allegations of operating an illegal exchange that trades in unregistered securities. This case is among the most conspicuous legal battles in the industry and is likely to influence the regulatory landscape for cryptocurrencies in the United States.
History Associates’ suit against the FDIC argues that the letters asking firms to pause digital assets business are part of a concerted effort by the FDIC and other financial regulators to pressure financial institutions into cutting off digital-asset firms from the banking system.
Coinbase’s Previous Legal Actions
In addition to its current legal battles, Coinbase has previously funded lawsuits against U.S. government entities. In 2022, Coinbase backed litigation against the U.S. Treasury Department concerning sanctions imposed on the cryptocurrency mixer Tornado Cash.
Although this lawsuit was initially unsuccessful, resulting in a federal court dismissal, the plaintiffs have since appealed the decision.
As Coinbase continues its legal pursuits, the outcomes of these cases are expected to play a crucial role in shaping the future regulatory framework for digital assets in the U.S., potentially setting significant precedents for how cryptocurrencies are treated under the law.
