Key Takeaways:
- Coinbase criticizes the SEC’s rejection of its rulemaking proposal as “arbitrary and capricious.
- Coinbase argues that SEC’s enforcement-based regulation approach damages American consumers.
Cryptocurrency exchange Coinbase is intensifying its legal fight against the United States Securities and Exchange Commission (SEC), urging a court to compel the agency to initiate the long-overdue process of establishing rules for the crypto industry.
In a recent filing with the Third Circuit Appeals Court on March 11, Coinbase accused the SEC of violating the Administrative Procedures Act (APA) by rejecting the exchange’s petition from July 2022, which sought to prompt the SEC to create regulations for the crypto sector.
The exchange argues that the SEC’s refusal lacked sufficient reasoning and broke procedural rules.
Coinbase emphasized the urgency of establishing clear regulatory guidelines for the rapidly expanding digital assets industry. The company asserts that the SEC’s enforcement actions without defined regulations create uncertainty and hinder industry growth.
Paul Grewal, Coinbase’s chief legal officer, emphasized the importance of transparency from the SEC, stating that the agency owes the public an explanation for its actions. He highlighted the inconsistency of the SEC’s demands for compliance without providing clear regulatory frameworks.
The lawsuit aims to compel the SEC to provide a reasoned justification for its denial of Coinbase’s petition and to initiate the rulemaking process for crypto regulation.
Coinbase argues that the SEC’s failure to explain how securities laws apply to crypto while aggressively enforcing those laws through lawsuits against crypto companies is arbitrary and capricious.
In response to Coinbase’s petition, Commissioners Hester Peirce and Mark Uyeda expressed the importance of addressing issues arising from new technologies and innovations, indicating the need for responsible regulation.
Coinbase’s appeal challenges the SEC’s denial as an abuse of discretion and contrary to law, seeking to compel the agency to begin the process of crafting clear regulatory frameworks for the crypto industry.
The outcome of Coinbase’s legal battle with the SEC holds significant implications for the crypto industry, as regulatory clarity is crucial for fostering innovation and growth. The case highlights the ongoing challenges of adapting existing regulatory frameworks to emerging technologies like cryptocurrency.
