​Coinbase urges SEC to clarify its position on staking

What’s new? The Coinbase exchange sent a letter to the US Securities and Exchange Commission (SEC) asking for clarification of its position on staking services and other aspects of the crypto industry. Representatives of the exchange said that staking does not meet all the points of the Howey test, so it cannot be considered an offering of securities. In addition, the company claims that it began providing detailed presentations about the operation of staking services on December 18, 2019, even before it went public.

Coinbase’s letter

The Howey test determines whether an investment contract is a security. It includes four criteria: investment, common enterprise, reasonable expectation of profits, and the efforts of others. In other words, such a test reveals whether investors expect income from the work of third parties.

What else does the letter say? Coinbase said that staking does not carry risks that federal securities laws have been designed to mitigate while acknowledging that individual staking services could be considered as such.

SEC chair allows the possibility of recognizing all PoS tokens as securities

That was Gary Gensler’s response to CFTC chairman Rostin Behnam’s statement that Ethereum is a commodity

Read further

The letter notes that the procedure for providing staking services does not have clear regulations. In this regard, the exchange urged the SEC to develop rules and procedures for their application to services that fall under the definition of a securities offering.

Coinbase’s representatives stressed that they have been actively sharing staking information with users even before entering the Nasdaq exchange in 2021, with no regulatory clarification about it until February 2023, when the SEC accused Kraken of selling unregistered securities, forcing the platform to stop providing staking services in the United States.

SEC chief records an address to crypto investors after settling with Kraken

Gary Gensler said that platforms offering digital asset staking programs must comply with regulatory requirements

Read further

Earlier, Coinbase chief legal officer Counsel Paul Grewal explained in detail why the exchange’s staking service is not an offering of securities. So, among other things, it does not meet the common enterprise criterion under the Howey test because assets are placed on decentralized networks. Brian Armstrong, the head of the exchange, said that in case of claims from the SEC will go to court to protect the staking service.

At the same time, Armstrong believes that Coinbase will be the main beneficiary of stricter crypto regulation in the United States. He called his company a regulated and legitimate market leader.