Allowing Coinbase to go public was not a ‘blessing’ of the business: SEC

The U.S. Securities and Exchange Commission (SEC) has argued in court that approving a firm’s S-1 application to go public, does not represent a “blessing” from the agency, nor provide a verification that the business is regulatory compliant.

In the interest of transparency, here is the transcript from our hearing yesterday in the SDNY case brought against us by the SEC. We appreciate the Court’s careful consideration. https://t.co/NEEsr05fos

— paulgrewal.eth (@iampaulgrewal) July 14, 2023

As per July 13 court documents from the pre-motion hearing of the SEC vs Coinbase case, the SEC asserted that it was not signing off on Coinbase’s business structure when giving it the greenlight to go public back in April 2021.

“Your Honor, I’ll say that simply because the SEC allows a company to go public does not mean that the SEC is blessing the underlying business or the underlying business structure or saying that the underlying business structure is not in violation of the law,” SEC trial counsel Peter Mancuso said, adding that:

“There is no way that an approval of an S-1 is a blessing of a company’s entire business. In fact, there is no evidence being put forth that the SEC looked at specific assets and made specific determinations and then gave Coinbase comfort that this would not later be found to be a security.”

On crypto Twitter, several people including Gemini co-founder Cameron Winklevoss highlighted the implications of such statements, as they questioned why the SEC would allow a supposedly non-compliant business to go public in the first place, given that its goal is to protect U.S. consumers.

so they allow ipo for illegal business and let americans invest in it? lmao sec is cooked

— Metatron (@metatron_0x) July 14, 2023

U.S.-based firms are required to submit an S-1 filing with the SEC before they can start listing their shares on a national stock exchange. As part of the filing, companies need to provide a comprehensive rundown of their business structure and how proceeds from an Initial Public Offering will be used.

Following Mancuso’s comments, U.S. District Judge Katherine Polk Failia said: “Let’s just pause so I can just sort of get rid of the skepticism I currently have as I hear that answer,” as she went on to raise some questions.

“I am not saying that the commission should be omniscient at the time it’s evaluating a registration statement and that it should know all things,” she said, adding:

“But I would have…