Coinbase Battles SEC Over Withheld Documents

Coinbase has intensified its legal fight against the U.S. Securities and Exchange Commission (SEC) by filing a motion in the U.S. District Court of Columbia. The crypto exchange claims that the SEC has deliberately withheld key documents and imposed unjustified delays. Obstructing Coinbase’s access to critical information needed for its defense.

In the motion, filed on October 15, Coinbase argues that the SEC has misused FOIA Exemption 7(A). A provision that allows agencies to withhold documents relevant to ongoing law enforcement proceedings. Now, Coinbase claims the SEC is proposing a three-year review to reassess the withheld documents. A move the exchange deems both unreasonable and obstructive.

Coinbase’s Legal Struggles

The Freedom of Information Act (FOIA), enacted in 1966, is a critical tool for ensuring transparency in federal agencies by granting public access to federal records. However, there are several exemptions, one of which, Exemption 7(A). The SEC is now using to block Coinbase’s request. This exemption permits withholding documents if their release could interfere with active law enforcement activities.

Coinbase contends that the SEC is invoking this exemption improperly. Delaying the release of documents critical to the company’s defense. The exchange’s October 15 filing is the latest escalation in a broader legal battle between Coinbase and the SEC. One that could significantly impact how crypto firms are regulated in the U.S.

The SEC’s FOIA Delays and Coinbase’s Response

This is not Coinbase’s first run-in with the SEC over transparency. In August 2024, Coinbase filed another motion seeking internal communications from the SEC, including records from SEC Chairman Gary Gensler. That request was also rejected.

In its latest motion, Coinbase criticized the SEC’s “stonewalling” tactics, stating that the exchange has no choice but to continue pressing for access to the requested documents. History Associates, a legal firm representing Coinbase, echoed this sentiment, pointing to the SEC’s repeated denials and delays.

While the SEC has argued that Coinbase’s subpoena request for additional documents is “overreaching” and “burdensome,” Coinbase is undeterred. The exchange remains focused on obtaining internal SEC documents related to Ethereum’s transition to proof-of-stake, as well as earlier enforcement actions involving companies like Enigma MPC and Zachary Coburn.

Coinbase’s FOIA Requests: What’s at Stake?

Coinbase’s requests date back to July and August 2023, when the company submitted FOIA petitions for internal SEC records tied to key events, such as Ethereum 2.0 and enforcement actions in the crypto space. At the time, the SEC denied these requests, again citing Exemption 7(A), as the records were linked to ongoing law enforcement proceedings.

In June 2024, Coinbase filed a lawsuit challenging the SEC’s refusal to disclose these documents. Interestingly, the SEC later admitted that the 7(A) exemption “may” no longer apply, though the agency has not provided any details on what changed.

On Twitter, Coinbase’s Chief Legal Officer Paul Grewal expressed his frustration over the SEC’s prolonged delays. “Over a year ago we made FOIA requests aimed at files on ETH 2.0 and other mysteries that belong to all of us, not [the SEC],” he wrote. “We then sued to end their stall, only to get an entirely new set of excuses.”

SEC’s Three-Year Document Review Sparks Controversy

One of the most contentious aspects of Coinbase’s latest filing is the SEC’s proposal for a three-year review of more than 132,000 documents. Coinbase argues that this delay is unnecessary, as the SEC should have reviewed these records for all potential FOIA exemptions when it first denied access.

The SEC has also hinted that it may request an Open America stay, a legal tool that could further delay the review process. Coinbase, however, contends that such a stay is unwarranted, given that the SEC has already had ample time to respond within FOIA’s 20-day statutory window.

As the legal battle between Coinbase and the SEC escalates, the outcome could have lasting implications for the cryptocurrency industry. With FOIA requests, lawsuits, and subpoenas in play, both sides are locked in a high-stakes confrontation. Coinbase’s push for transparency continues to clash with the SEC’s legal maneuvers, leaving the crypto world to watch closely as the case unfolds.