Coinbase ($COIN@US) has responded to the Wells notice from the US Securities and Exchange Commission (SEC) issued last month, arguing that an enforcement action against the crypto exchange would pose “major programmatic risks” to the SEC and would “fail on the merits.” The SEC's warning to Coinbase in March alleged that the exchange was offering and selling unregistered securities violating federal law, which could force Coinbase to cease some of its services. Coinbase argued that the SEC's analysis relied on "flawed and untested" theories and that its retail staking services fail all four prongs of the Howey test. The Howey test, which securities lawyers use to determine if transactions constitute investment contracts. Coinbase argues that as a secondary market, where investors buy and sell assets they already own, the Howey test's reach does not include their trading services.
