Coinbase offers a fiery response to the SEC’s threat of enforcement action
Brian Armstrong, co-founder and chief executive officer of Coinbase Inc., speaks during the Singapore Fintech Festival, in Singapore, on Friday, Nov. 4, 2022.
Bryan van der Beek | Bloomberg | Getty Images
Crypto exchange Coinbase offered a fiery response on Thursday to last month’s Wells notice from the SEC, telling the federal regulator that an enforcement action against the crypto exchange would pose “major programmatic risks” to the SEC that would “fail on the merits.”
“Coinbase does not list, clear, or effect trading in securities,” the company’s response said. The analysis SEC did staffers to justify an enforcement action “appears to rest on superficial and incorrect analogies to products and services offered by others,” Coinbase wrote in a blog post from chief legal officer Paul Grewal.
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Separately, Grewal told CNBC, “At the time when we went public we had detailed discussions with the SEC about the very aspects of our business that are now — two years later — the subject of the Wells notice. Nothing has changed.”
The SEC indicated to Coinbase in a March wells notice that its spot trading, staking, custody and institutional trading businesses were at risk. The SEC’s warning to Coinbase noted that the regulator would allege Coinbase was offering and selling unregistered securities, in violation of federal law. The SEC has used unregistered offering and sale violations to force other crypto exchanges to close services in the U.S., including the crypto exchange Kraken’s staking-as-a-service product.
If the SEC succeeded, it could force Coinbase to close down those units. To date, the SEC has never approved a crypto-asset entity as an national securities exchange, despite an extensive dialogue with Coinbase over the years.
Executives at the crypto firm have signaled for months that the Coinbase is ready to grapple with the SEC in an existential case not just for Coinbase but the future of the crypto industry in the U.S. at large.
Coinbase noted that the company’s years-long efforts to cooperate with SEC securities staff produced no concerns from SEC staffers until recently. Coinbase also noted that the SEC could have denied the company permission to go public in 2021, when it reviewed Coinbase’s S-1 filing.
Perhaps most consequentially for the rest of the U.S. crypto industry, Coinbase also argues that proposed charges rely on “flawed and untested” theories involving investment contracts, spot markets, and custody services.
Securities lawyers rely on something known as the Howey test, from a Supreme Court case where the SEC sued an Florida orange grove operator for a leaseback and profit-sharing arrangement involving the sale of oranges.
The four elements required to determine whether transactions constitute investment contracts: an investment, in common enterprise, and reasonable expectation of profit, from derived from the work of others.
Coinbase is a secondary market, meaning that investors buy and sell assets that they already own rather than purchasing them directly from an issuer. The Nasdaq and the NYSE are also secondary markets for U.S. equities. Courts have already been reluctant to extend “Howey’s reach to include the secondary trading of assets where no issuer is involved,” Coinbase’s response noted.
Coinbase also issued a point-by-point repudiation of Howey’s applicability to the exchange’s staking service. “Coinbase’s retail staking services fail all four prongs of the Howey test,” Coinbase’s response said.
Coinbase is represented by Sullivan & Cromwell.
“The SEC generally does not acknowledge the existence or non-existence of any investigation unless or until charges are filed,” a spokesperson for the SEC told CNBC.
“Coinbase has never wanted to litigate with the Commission. The Commission should not want to litigate either,” Coinbase wrote in its response. “Litigation will put the Commission’s own actions on trial,” Coinbase said, and “erode public trust cultivated over decades.
A Waymo rider-only robotaxi is seen during a test ride in San Francisco, California, U.S., December 9, 2022.
Paresh Dave | Reuters
Alphabet’s Waymo unit plans on bringing its robotaxi service to Dallas next year, adding to a growing list of prospective U.S. markets for 2026, including Miami and Washington, D.C.
Rental car company Avis Budget Group will be managing the Waymo fleet in Dallas, via a new partnership the companies announced Monday.
Avis CEO Brian Choi said in a statement that the agreement marks a “milestone” for the company, which is now also working to become “a leading provider of fleet management, infrastructure and operations to the broader mobility ecosystem.”
Waymo robotaxi testing is already underway in downtown Dallas involving the company’s Jaguar I-PACE electric vehicles with the Waymo Driver system. That combines automated driving software, sensors and other hardware that power the vehicles’ “level 4,” driverless operations.
Passengers will be able to hail a driverless ride using the Waymo app in Dallas. In some other markets, Waymo only makes its services available through ride-hailing platform Uber.
Waymo has surged ahead in the robotaxi market while other autonomous vehicle developers, including Tesla, Amazon-owned Zoox, and venture-backed startups such as Nuro, May Mobility and Wayve, are working to make autonomous transportation a commercial reality in the U.S.
Waymo says it conducts more than 250,000 paid weekly trips in the markets where it operates commercially, including Atlanta, Austin, Los Angeles, Phoenix and San Francisco.
Waymo’s steepest competition internationally comes from Baidu’s robotaxi venture Apollo Go in China, which is eyeing expansion in Europe.
On Alphabet’s second-quarter earnings call, execs boasted that, “The Waymo Driver has now autonomously driven over 100 million miles on public roads, and the team is testing across more than 10 cities this year, including New York and Philadelphia.”
The business has become significant enough that Alphabet even added a category to its Other Bets revenue description in its latest quarterly filing.
“Revenues from Other Bets are generated primarily from the sale of autonomous transportation services, healthcare-related services and internet services,” the filing said.
The Other Bets segment remains relatively small, however, with revenue coming in at $373 million in the quarter, up from $365 million a year ago. The division still reported a loss of $1.25 billion, widening from $1.13 billion in the second quarter of 2024.
WATCH: Waymo co-CEO on 10 million driverless rides and Tesla’s coming robtaxi challenge
Ray-Ban Meta smart glasses on display in the window of a Ray Ban store in London, UK, on Friday, July 19, 2024.
Bloomberg | Bloomberg | Getty Images
Revenue from sales of Ray-Ban Meta smart glasses more than tripled year over year, EssilorLuxottica revealed Monday as part of the company’s most recent earnings report.
EssilorLuxottica said the success of the Ray-Ban Meta glasses, built via a partnership with the Facebook parent stemming back to 2019, contributed to its first-half overall sales of 14.02 billion euro (US$16.25 billion), which represents a 7.3% year-over-year jump.
“We are leading the transformation of glasses as the next computing platform, one where AI, sensory tech and a data-rich healthcare infrastructure will converge to empower humans and unlock our full potential,” EssilorLuxottica CEO Francesco Milleri and deputy CEO Paul du Saillant said in a joint-statement. “The success of Ray-Ban Meta, the launch of Oakley Meta Performance AI glasses and the positive response to Nuance Audio are major milestones for us in this new frontier.”
In the earnings report, the company said that its new Oakley Meta smart glasses, unveiled in June, represents the latest product line to come from its partnership with the social media company. CNBC reported in June that Meta and Luxottica plan to debut a Prada-branded version of its smart glasses in the future.
Luxottica owns several well-known brands including Ray-Ban, Oakley, Vogue Eyewear and Persol.
In September, Meta renewed a long-term partnership agreement with Luxottica to “collaborate into the next decade to develop multi-generational smart eyewear products,” according to the announcement.
WATCH: Meta’s ambitious AI plans.
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