Coinbase has strongly denied that it listed securities on its platform, according to a July 21 blog post by Paul Grewal, the firm’s Chief  Legal Officer.

1/ Coinbase doesn’t list securities. Period. ⬇️

— paulgrewal.eth (@iampaulgrewal) July 21, 2022

SEC classifies nine crypto assets as securities

The Securities and Exchange Commission (SEC), in a July 21 complaint filed against former Coinbase product manager Ishan Wahi, his brother Nikhil Wahi, and Sameer Ramani, classified nine crypto assets as securities.

The affected crypto assets are Flexa Network’s AMP, Rally Network (RLY), DerivaDEX (DDX), XYO, Rari Governance Token (RGT), and Lichenstein Cryptoasset Exchange (LCX). Others are Power Ledger (POWR), DFX Finance (DFX), and Kromatilka (KROM).

According to the SEC complaint, a crypto asset is a security if it satisfies the Securities Act definition of an “investment contract.”

The financial regulator claimed that the listed assets satisfy that definition because their investors invested in a joint enterprise with the intent of profiting from the efforts of others.

Coinbase disagrees with SEC

Paul Grewal said that seven of the nine assets classified by the SEC are listed on Coinbase. However, the exchange “100% disagrees with the SEC’s decision to file these securities fraud charges.”

According to Grewal, the crypto exchange has an SEC-reviewed process of analyzing crypto assets to determine whether they are securities and regulatory compliant.

Grewal continued that the SEC’s decision to “jump directly to litigation” highlighted the lack of regulatory clarity for “digital assets securities.” Grewal said:

“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.”

Meanwhile, Coinbase filed a petition on July 21 for the SEC to provide regulatory clarity on digital asset securities.

CFTC commissioner weighs in

Commodity Futures Trading Commission (CFTC) Commissioner Caroline Pham declared that the broad classification by the SEC is “a striking example of ‘regulation by enforcement.’”

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

According to Commissioner Pham, the SEC allegations would have broader implications because the commission lumped together assets “that could be described as utility tokens and/or certain tokens relating to (a) decentralized autonomous organization (DAOs)” as securities.

SEC’s approach raises questions

SEC’s refusal to sue the asset issuers alongside Coinbase has raised questions within the crypto community.

The SEC alleges in today’s complaint that nine digital assets are securities, but don’t explain their analysis for even one.

They also didn’t sue the issuers or exchange where the tokens traded: the people with resources to fight back.

They just went after one man & his family.

— Jake Chervinsky (@jchervinsky) July 21, 2022

US lawmaker Brad Sherman raised the same question on July 19 when he questioned why the SEC had refused to bring enforcement actions against exchanges that listed Ripple (XRP) since it considers its security.

Another lawmaker Tom Emmer July 19, said the SEC was “politicizing regulations” and “discouraging good-faith cooperation” by using its enforcement division to expand its jurisdiction.