Coinbase Launches Legal Offensive Against SEC and FDIC

Coinbase, the largest U.S. crypto exchange, has filed lawsuits against the Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC) to obtain documents related to their approaches to crypto regulation. Filed on Thursday in a Washington, D.C. district court, these lawsuits aim to uncover what Coinbase describes as a coordinated effort by federal financial regulators to pressure banks into denying crypto firms access to the banking system.

A Coinbase spokeswoman stated, “For years, financial regulators – including the SEC, the FDIC, and the Federal Reserve Board – have used every tool at their disposal to try to cripple the digital-asset industry. We demand transparency from our federal government.”

While the SEC declined to comment and the FDIC did not respond immediately, Coinbase’s move follows its failed attempts to obtain information through the Freedom of Information Act (FOIA). These requests were related to three SEC investigations into crypto firms and entrepreneurs from 2018 to 2024, including a recently closed probe into the Ethereum blockchain network. Coinbase hopes the information will clarify the SEC’s evolving stance on digital assets.

Coinbase also seeks details on “pause letters” sent by the FDIC to several banks between March 2022 and May 2023, asking them to halt crypto-related activities until further guidance on associated risks could be provided. These letters were revealed in an October report by the FDIC’s Office of the Inspector General.

Despite being legally entitled to the information under FOIA, Coinbase says both the SEC and FDIC have denied their requests. This is the second time this month the SEC has been sued for failing to comply with FOIA requests. On June 6, the American Securities Association sued the SEC for documents related to investigations into record-keeping practices at major Wall Street firms.

Coinbase alleges that the SEC and FDIC are using similar reasons to deny access, including whether top leadership at these agencies are coordinating efforts to “choke off” the $2 trillion digital assets industry from the federal banking system. This situation is often referred to within the industry as “Operation Chokepoint 2.0,” reminiscent of a 2013 initiative that targeted “high risk” businesses like payday lenders by denying them banking services.

Other crypto industry participants have reported similar difficulties. Erik Voorhees, founder of the crypto exchange Shapeshift, recently complained on social media that the fintech firm Revolut shut down his account for “interacting with crypto.” Additionally, Wyoming-based crypto bank Custodia is appealing a judge’s decision to allow the Federal Reserve to deny it access to a master account, which is essential for accessing central bank liquidity facilities and payment services.

Coinbase hopes its lawsuits will shed light on the SEC’s rationale behind its enforcement actions against the exchange. Currently, the SEC claims Coinbase is violating securities laws by offering potential unregistered securities in the form of cryptocurrencies on its platform.

However, obtaining this information may take time. A recent Government Accountability Office report highlights a significant backlog of FOIA requests, with over 200,000 pending requests in 2022 alone.

Coinbase’s legal push for transparency underscores the growing tension between the crypto industry and federal regulators, as the battle over the future of digital assets continues to intensify.