A federal judge has urged Coinbase to either abandon or significantly alter its attempt to subpoena U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler’s personal communications. This directive came during a hearing on Thursday presided over by Judge Katherine Polk Failla of the District Court for the Southern District of New York.

The hearing, scheduled on short notice, followed a request from SEC attorneys last month to block Coinbase’s subpoena aimed at Gensler. Judge Failla expressed her surprise at Coinbase’s request, particularly as it pertained to Gensler in his personal capacity. After hearing arguments from both sides, she indicated that she still considered Coinbase’s request inappropriate. However, she advised the exchange to file a motion to compel, initiating a formal proceeding for a more detailed examination of both parties’ arguments.

“I felt there was something I was not comprehending,” Judge Failla remarked at the outset. “Counsel on both sides are exceptionally intelligent and adept, yet I found the arguments in the July 3rd response to border on the ludicrous.”

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The judge specifically criticized Coinbase’s request for documents predating Gensler’s term as SEC chair. Kevin Schwartz, an attorney from Wachtell, Lipton, Rosen & Katz representing Coinbase, argued that the SEC had refused to discuss the full scope of the documents Coinbase might possess, and maintained that Gensler’s communications were pertinent to the case. Conversely, Jorge Tenreiro, an SEC senior trial attorney, contended that Gensler’s pre-chair communications were irrelevant, emphasizing that Gensler is neither a fact nor expert witness in this case and cautioning against setting a problematic precedent for future cases.

Towards the conclusion of the hearing, Judge Failla conveyed her strong views on the irrelevance of Gensler’s pre-chair statements and leaned towards the SEC’s stance that the requests were inappropriate. Nonetheless, she urged both parties to collaborate on a briefing schedule, indicating a preference for Coinbase to file a motion to compel rather than proceeding with the SEC’s motion to quash.

Background of the Subpoena Effort

In April, Coinbase initially served the SEC with requests for document production. By June, the exchange revealed plans to subpoena SEC Chair Gary Gensler’s personal communications related to cryptocurrency during his tenure and for the preceding four years. The SEC, in a June 28 letter to the court, rebuffed this request, labeling it an “improper intrusion” into Gensler’s private life and argued that any subpoena should target the SEC as an institution, not its individual employees.

“Given the complete lack of relevance of the requested documents and the potential chilling effect on public service, the Court should quash the Subpoena and issue a protective order,” SEC attorneys contended.

During Thursday’s hearing, Coinbase’s Schwartz asserted that the SEC’s charges included conduct predating Gensler’s tenure as chair, to which Tenreiro responded that the charges pertained specifically to Coinbase’s actions, not Gensler’s private communications.

Coinbase’s Justification for the Subpoena

In a July 3 response to the SEC’s court letter, Coinbase’s legal team argued that subpoenaing Gensler’s personal communications was justified. They emphasized Gensler’s dual role as both a prominent regulator and vocal academic commentator on digital asset regulation, who frequently clarifies that his public statements reflect his personal views rather than the SEC’s official stance.

“What Mr. Gensler communicated in his private exchanges regarding the regulatory status of digital assets, and what market participants conveyed to him, is indicative of the public and market participants’ understanding of securities law prohibitions,” Coinbase’s lawyers asserted. “A document or communication need not be public to shed light on the public’s understanding of regulatory requirements: communications between agency personnel and market participants, as well as interagency correspondence, are all ‘relevant to the fair notice defense.'”