Beautiful Virgin Islands

Thursday, Jul 03, 2025

Coinbase insider trading case sparks tug-of-war between SEC and CFTC

Coinbase insider trading case sparks tug-of-war between SEC and CFTC

Caroline Pham of the Commodity Futures Trading Commission appeared to criticise her colleagues at the Securities and Exchange Commission over a case of crypto insider trading as the two battle for regulatory oversight.
Coinbase insider trading case in the middle of a regulatory tug-of-war for control over the prestigious task of regulating crypto assets.

The Securities and Exchange Commission charged on Thursday a former Coinbase product manager and two associates with securities fraud.

The trio had allegedly made off with over $1 million in illicit profits based on sensitive and confidential corporate information. Two of them have been arrested—one while he was attempting to leave the country—and are now held in U.S. law enforcement custody.

There’s just one problem.

Coinbase says the men could not have possibly committed securities fraud, because Coinbase doesn’t even offer clients the ability to trade securities. More to the point, the Justice Department and the Commodity Futures Trading Commission appear to think so as well, the crypto exchange claims.

“The DOJ reviewed the same facts and chose not to file securities fraud charges against those involved. As CFTC Commissioner Caroline Pham stated, this is a ‘striking example of regulation by enforcement’ by the SEC,” wrote the company’s chief legal officer, Paul Grewal in a post published on Friday entitled “Coinbase does not list securities. End of Story”.

The case, SEC vs Wahi, is shaping up into a regulatory tug-of-war pitting the CFTC against the SEC, and reopens the debate over which regulatory bucket a digital coin or token falls into and which U.S. agency will win the high-profile task of providing oversight.

Read my statement on #SEC v. Wahi, regulation by enforcement & #CFTC authority #crypto #digitalassets #DAO pic.twitter.com/xbHvyshx8l

— Caroline D. Pham (@CarolineDPham) July 21, 2022

“Instead of crafting tailored rules in an inclusive and transparent way, the SEC is relying on these types of one-off enforcement actions to try to bring all digital assets into its jurisdiction, even those assets that are not securities,” argued Grewal.

Meanwhile, Commissioner Pham of the CFTC seemed to criticize the SEC in a statement posted on social media.

"The SEC’s allegations could have broad implications beyond this single case, underscoring how critical and urgent it is that regulators work together," she wrote.
Not concerned with labels

Currently, Coinbase believes the SEC, an agency with a long reach, is staking its claim to that prize. Without a clear set of guidelines that provide a level playing field and legal certainty, this piecemeal approach of one-off enforcement actions by the SEC could potentially stifle the innovation in the crypto industry, it fears.

Coinbase's chief policy officer, Faryar Shirzad, wrote in a separate post that the SEC's intervention has created “enormous risk” for investors, citing the case of Ripple’s native token XRP suddenly being deemed by the SEC a security.

“We saw this in vivid detail when the Commission brought an enforcement action against Ripple, after years of taking no action against them,” Shirzad wrote. “The XRP case is especially notable because there was disagreement even within the federal government about whether XRP was a security or not: FinCEN [Financial Crimes Enforcement Network] had determined it was not a security, and then the SEC said that it was.”

The regulatory treatment of crypto is a controversial one. Michael Saylor, CEO of MicroStrategy the largest publicly-known holder of Bitcoin, recently argued that only Bitcoin fits the description of a commodity as it lacks an issuer, product development, employees, or a management team.

All other cryptocurrencies are by comparison little more than “unregulated securities” in his book. That’s because they fit the broad description: There is typically a team behind them attempting to add functionality to their coins and tokens, as well as encouraging a decentralized system of third-party applications to build on top of their blockchains' base layer of code.

Grewal counters by saying Coinbase does an extensive review of each asset it lists. In the process the company weeds out whatever could potentially be deemed a security that would fall under the SEC’s purview. As a result, his company has been actively cooperating with the DOJ, which is pursuing the case not as securities fraud but as wire fraud.

“The SEC’s charges put a spotlight on an important problem: the U.S. doesn’t have a clear or workable regulatory framework for digital asset securities," Grewal wrote.

It also raises the issue over whether U.S. financial markets may eventually find themselves at a disadvantage to other jurisdictions, notably the European Union, that have already implemented a legal framework to give issuers certainty.

The SEC's director for the Division of Enforcement, Gurbir Grewal (not related to Paul Grewal) was unmoved by the debate.

“We’re not concerned with labels, but rather the economic realities of an offering,” he said in a statement. “Rest assured, we’ll continue to ensure a level playing field for investors, regardless of the label placed on the securities involved.”
Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
DJI Launches Heavy-Duty Coaxial Quadcopter with 80 kg Lift Capacity
U.S. Senate Approves Major Legislation Dubbed the 'Big Beautiful Bill'
Largest Healthcare Fraud Takedown in U.S. History Announced by DOJ
Poland Implements Border Checks Amid Growing Migration Tensions
Political Dispute Escalates Between Trump and Musk
Emirates Airline Expands Market Share with New $20 Million Campaign
Amazon Reaches Milestone with Deployment of One Millionth Robot
US Senate Votes to Remove AI Regulation Moratorium from Domestic Policy Bill
Yulia Putintseva Calls for Spectator Ejection at Wimbledon Over Safety Concerns
Jury Deliberations in Diddy Trial Yield Partial Verdict in Serious Criminal Charges
House Oversight Committee Subpoenas Former Jill Biden Aide Amid Investigation into Alleged Concealment of President Biden's Cognitive Health
King Charles Plans Significant Role for Prince Harry in Coronation
Two Chinese Nationals Arrested for Espionage Activities Against U.S. Navy
Amazon Reaches Major Automation Milestone with Over One Million Robots
Extreme Heat Wave Sweeps Across Europe, Hitting Record Temperatures
Meta Announces Formation of Ambitious AI Unit, Meta Superintelligence Labs
Robots Compete in Football Tournament in China Amid Injuries
Trump Administration Considers Withdrawal of Funding for Hospitals Providing Gender Treatment to Minors
Texas Enacts Law Allowing Gold and Silver Transactions
China Unveils Miniature Insect-Like Surveillance Drone
OpenAI Secures Multimillion-Dollar AI Contracts with Pentagon, India, and Grab
Marc Marquez Claims Victory at Dutch Grand Prix Amidst Family Misfortune
Germany Votes to Suspend Family Reunification for Asylum Seekers
Elon Musk Critiques Senate Budget Proposal Over Job Losses and Strategic Risks
Los Angeles Riots ended with Federal Investigations into Funding
Budapest Pride Parade Draws 200,000 Participants Amid Government Ban
Southern Europe Experiences Extreme Heat
Xiaomi's YU7 SUV Launch Garners Record Pre-Orders Amid Market Challenges
Jeff Bezos and Lauren Sanchez's Lavish Wedding in Venice
Russia Launches Largest Air Assault on Ukraine Since Invasion
Education Secretary Announces Overhaul of Complaints System Amid Rising Parental Grievances
Massive Anti-Government Protests Erupt in Belgrade
Trump Ends Trade Talks with Canada Over Digital Services Tax
UK Government Softens Welfare Reform Plans Amid Labour Party Rebellion
Labour Faces Rebellion Over Disability Benefit Reforms Ahead of Key Vote
Jeff Bezos and Lauren Sánchez Host Lavish Wedding in Venice Amid Protests
Trump Asserts Readiness for Further Strikes on Iran Amid Nuclear Tensions
North Korea to Open New Beach Resort to Boost Tourism Economy
UK Labour Party Faces Internal Tensions Over Welfare Reforms
Andrew Cuomo Hints at Potential November Comeback Amid Democratic Primary Results
Curtis Sliwa Champions His Vision for New York City Amid Rising Crime Concerns
Federal Reserve Proposes Changes to Capital Rule Affecting Major Banks
EU TO HUNGARY: LET THEM PRIDE OR PREP FOR SHADE. ORBÁN TO EU: STAY IN YOUR LANE AND FIX YOUR OWN MESS.
Trump Escalates Criticism of Media Over Iran Strike Coverage
Trump Announces Upcoming US-Iran Meeting Amid Controversial Airstrikes
Trump Moves to Reshape Middle East Following Israel-Iran Conflict
Big Four Accounting Firms Fined in Exam Cheating Scandal
NATO Members Agree to 5% Defense Spending Target by 2035
Australia's Star Casino Secures $195 Million Rescue Package Amid Challenges
UK to Enhance Nuclear Capabilities with Acquisition of F-35A Fighter Jets
×