First Look: Comprehensive Summary of the SEC vs. Coinbase case and the Next Chapter of Chokepoint 2.0

ANOTHER special edition of the newsletter, this time looking at the next lawsuit on Gensler's list, the one against Coinbase.

Yet another newsletter today … fairly unusual, I know, but it’s fairly unusual that the SEC would go after both the biggest exchange in the world and then subsequently go after the biggest exchange in the United States.

I’ll get into the play by play on the 130 pages of lawsuit filed early this morning below the paywall, but the market had a much more tepid reaction to this lawsuit than yesterday’s Binance lawsuit… I think there’s a couple of reasons why.

First, a lot of the pain was priced in, and the market had already begun to rebound. As I write this, Bitcoin and Ethereum are both up 1-2% since the news was announced this morning. While I think the market’s reaction is slightly puzzling, what isn’t is that the tenor of the suit and the timing of it clearly indicate that this is not about investor protection, but finishing the years long gambit of Chokepoint 2.0 the government has been engaged with, starting with OTC sellers like me and ending up with the biggest broker dealers on the planet.

To that end, I think that the government has overplayed its hand. This will have a chilling effect, sure, on institutional investment, but the very fact that the SEC approved Coinbase’s IPO days before Gensler was appointed, and every day since the SEC has been building towards eventually taking them down shows how much of a naked landgrab this is, and there will likely be Congressional reprisal as a result.

We’ll spend more time in the coming days and weeks analyzing the implications of this suit, but I think at minimum, we’ve entered the endgame for the US vs Innovation, and we’re going to see how truly well thought out this gambit actually was.

Again, here’s the raw and unedited AI brief of the suit.

And here’s the direct link to the suit PDFs.