A former SEC lawyer Marc Fagel explains what could be delaying the commission’s enforcement action against Coinbase.
Former SEC lawyer Marc Fagel took to Twitter to reveal the possible reasons why the US Securities and Exchange Commission (SEC) has not taken any legal action against Coinbase, America’s largest crypto exchange by trade volume.
Recall that Coinbase disclosed in March that it received a Wells Notice from the commission.
The SEC notified Coinbase that it made a preliminary determination to recommend an enforcement action against the exchange, alleging violations of federal securities laws. A month later, Coinbase responded to the SEC’s Wells Notice, stating that it does not list securities.
Following the SEC’s Wells Notice to Coinbase, many expected the commission to subsequently charge the exchange with violating federal securities laws.
Yesterday, famous cryptocurrency enthusiast Mr. Huber (@Leerzeit) pointed out that the commission has not sued Coinbase despite issuing a Wells Notice to the firm two months ago.
“Btw. Where is that SEC lawsuit against @coinbase everybody was talking about? The Wells Notice is now more than two months back, and nothing happened. Much ado about nothing,” said Huber.
Ripple Lawsuit Could Be Delaying Action Against Coinbase
Reacting to the tweet, Fagel noted that it is not unusual that the SEC has still not sued Coinbase despite issuing a Wells Notice to the company two months ago.
“It typically takes 30-60 days after a Wells submission is received for an enforcement action, if approved, to be filed (longer if meaningful settlement talks),” Fagel disclosed.
It typically takes 30-60 days after a Wells submission is received for an enforcement action, if approved, to be filed (longer if meaningful settlement talks). So this is not unusual (submission was 4/19). But they could also be awaiting a Ripple ruling before going forward.
— Marc Fagel (@Marc_Fagel) May 28, 2023
The former SEC lawyer noted that the Wells submission was made around April 19. He also stressed that the SEC could await a ruling in the Ripple lawsuit before proceeding with an enforcement action against Coinbase.
Pro-XRP Lawyer Reacts
Fagel’s opinion has prompted reactions from XRP enthusiasts, including Australian-based lawyer Bill Morgan. In a tweet yesterday, attorney Morgan asked Fagel whether the SEC will halt the enforcement action against crypto exchanges if it loses its case against Ripple.
That is interesting to contemplate. If the SEC is waiting for the Ripple decision and is unsuccessful would you expect the enforcement actions against crypto exchanges to be paused or not pursued at all? https://t.co/OVFnAiOStk
— bill morgan (@Belisarius2020) May 28, 2023
The former SEC lawyer has yet to respond to attorney Morgan’s inquiry in the hours leading up to press time.
SEC vs. Ripple Lawsuit
Notably, the legal battle between the SEC and Ripple has lingered for over two years. The commission alleges that Ripple raised $1.3 billion by selling unregistered securities – a claim Ripple has vehemently contested.
The case has been fully briefed, and the parties are expecting a summary judgment decision any moment from now. While there is no official date for a final verdict, Ripple CEO Brad Garlinghouse expects the judge to issue a ruling in the coming weeks. This is according to a recent report from The Crypto Basic.
Meanwhile, legal experts believe the case outcome will play a huge role in determining cryptocurrency regulations in the United States. A win for the SEC could make the commission become the primary regulator for crypto. However, a win for Ripple could pave the way for favorable and clearer cryptocurrency regulations.