September 22, 2023

Dealing with Regulators: The Best Defense is a Good Offense?

Until recently, when a company ran into potential trouble with the SEC or another regulator, it usually made only the blandest of statements in its own defense if it commented at all. But these days, it’s becoming increasingly fashionable for companies to take their case to the court of public opinion and to bash their regulators as part of that strategy.  Here’s an excerpt from this Axios newsletter:

As Axios’ Crystal Kim recently pointed out in her crypto newsletter, most companies clam up when the Securities and Exchange Commission (SEC) comes knocking, but that’s not the approach Coinbase Global is taking.

Zoom in: Coinbase has been unusually vocal about run-ins with its primary regulator in blogs, tweets, podcasts and media interviews — offering up subpoenas, court filings (theirs and their adversaries) and legal analysis in near real time to the public.

Coinbase also started an advocacy campaign called Stand With Crypto seeking to mobilize public support for crypto rules. “In terms of how we thought about public messaging, we needed to start with first principles to basically reconsider anything and everything we had been taught about how to engage,” Paul Grewal, Coinbase’s chief legal officer, told Kim.

Zoom out: Coinbase isn’t alone. Activision Blizzard and Airbnb haven’t pulled punches in their battles with regulators, while DoorDash and Oatly have pushed back hard against misinformation or public critiques. “There are advantages in speaking out and creating a public issue, so others can be aware and support the defense,” Junaid Zubairi, an attorney at Vedder Price, told Axios.

I guess I can understand why companies dealing with a potentially existential regulatory issue might decide to take a scorched earth approach, but at the risk of provoking an “okay boomer” response from many of our readers, I don’t see the long-term upside of spewing vitriol at a regulator that a company is going to have to deal with on a regular basis for the foreseeable future.

John Jenkins