Proposal”Unfair Treatment: Coinbase Condemns SEC for Illegal Rejection of Crypto Proposal
U.S. Crypto Exchange Coinbase Sues SEC For Ignoring Law In Petition For Crypto Regulations
In a recent move, the United States’ top cryptocurrency exchange Coinbase has filed a legal action against the Securities and Exchange Commission (SEC) for rejecting its formal petition for crypto rules. According to the filing made on Monday in the U.S. Court of Appeals for the Third Circuit, the company has accused the securities regulator of unfairly disregarding the law and behaving arbitrarily and capriciously in its refusal to establish specific regulations for the crypto industry.
This latest development adds another chapter to the ongoing debate over the SEC’s authority to oversee and regulate digital assets, as well as the lack of clear and comprehensive guidelines for the industry. The case is seen as a crucial pushback against the SEC’s approach to regulating crypto assets through enforcement actions rather than through formal rulemaking.
When Coinbase’s formal petition for rulemaking was denied by the SEC in December last year, the agency did not provide any concrete explanation for its decision. In its response, SEC Chair Gary Gensler noted that while the regulator is actively working on crypto rules, it is important for the commission to maintain discretion in setting its own priorities for rulemaking.
However, Coinbase’s lawyers assert that the SEC’s lack of explanation for its inaction points towards the need for a proper explanation and a chance for the public to weigh in on the regulator’s use of its powers. The company’s chief legal officer, Paul Grewal, took to the company’s online platform X to state that the SEC’s denial was vague and did not provide any real reason for not initiating rulemaking on crypto.
The lawsuit filed by Coinbase aims to compel the SEC to provide an explanation for its refusal to establish clear and stable standards for the industry, which would help companies like Coinbase comply with relevant requirements without fear of enforcement actions.
The lack of clarity in the SEC’s approach to regulating crypto has also been seen in its ongoing court battle with Coinbase over the operation of an unregistered exchange. The SEC has accused the company of facilitating the trading of unregistered crypto securities, but it has not yet provided a definitive definition of what constitutes a crypto security, despite ruling against several companies in recent cases.
The agency has also been working on several significant rulemaking initiatives that could have far-reaching effects on the industry. These include proposals to amend the definition of exchanges to encompass crypto platforms, the requirement for investment advisors to use qualified custodians to store clients’ digital assets, and the recent finalization of a rule expanding the definition of dealers to include DeFi platforms.
While the SEC has had varied success in its court cases against crypto companies, its actions have garnered a significant level of attention from the industry and are likely to continue to do so in the future. With several cases making their way through appeals courts and potentially being escalated to the U.S. Supreme Court, the outcomes of these legal battles could have a significant impact on the development and regulation of the crypto industry in the United States.
