PANews reported on March 21 that Coinbase Chief Legal Officer Paul Grewal tweeted: “Today, Coinbase submitted a comment letter to our July 2022 SEC rule-making petition. We explained why the core staking service is not a securities offering and asked the SEC to clarify the fact that the core staking service is not a security.”
Grewal claimed that the core staking service failed every prong of the Howey test and reiterated several arguments in support of this argument, including that the staking service does not constitute an investment of money, the staking service does not meet the "ordinary enterprise" prong of Howey, the staking service does not meet the "reasonable expectation of profits" element of Howey, and the staking service does not pay rewards based on the "efforts of others."
“This is not the first time the SEC has had to grapple with rapidly evolving technology in real time,” Grewal said. “There are a number of paths the SEC could have taken rather than enforcement, including explicitly stating that the language in the version of Rule 3a-4 meant that staking services did not involve securities offerings. Proof of stake is an important development for blockchain technology, and the world will not wait for the United States to figure out what it is going to do. If the United States does not lead, the industry will move to places where it can work—even if those places lack U.S. market standards. The SEC is enforcing without having done the necessary work. It did not (1) identify a problem that the securities laws can address, (2) engage the public, (3) solicit expert opinion, (4) describe the economic impact of its actions, or (5) explain the benefits. It is not too late to do that. But the SEC needs to engage with the public and use its regulatory tools to provide clarity to the industry. We stand ready to help.”