Coinbase Fights Back: Requests Mandamus Against SEC, Pushes for Rulemaking

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Key takeaways:

  • Once more, and this time within seven days, Coinbase has requested a response from the SEC.
  • Even with a mandamus writ, Coinbase and the SEC argued over the proper response time for rulemaking.

In its most recent attempt to get the SEC to adopt regulations on digital assets, Coinbase has submitted a response in support of its petition for a writ of mandamus to the U.S. Securities and Exchange Commission (SEC). 

In a petition submitted to the Securities and Exchange Commission (SEC) in July, Coinbase asked the agency to develop and implement regulations for regulating securities sold and traded using digitally native means, including potential rules to determine which digital assets are securities. It offered the agency 50 questions to take into account when drafting regulations.

According to the Coinbase file from May 22, the government had decided to deny Coinbase’s petition for July but had not yet made that decision public. 

Even with a mandamus writ, Coinbase and the SEC argued over the proper response time for rulemaking. In a recent filing, Coinbase contended that its situation was unique from others:

“But the SEC has not cited, and Coinbase has not found, a single case in which a court has approved even a months-long delay when an agency was actively pursuing enforcement on the same topics of the rulemaking petition — let alone when the agency was threatening suit against the rulemaking petitioner itself.”

Coinbase requested a writ of mandamus from the U.S. Court of Appeals for the Third Circuit after waiting until April for the government to answer but not receiving one. Under the mandamus, the SEC could react by denying the petition’s demand for action. It would, after that, be vulnerable to additional judicial motions to compel rulemaking on digital assets.

The mandamus received no immediate response from the SEC. The SEC responded on May 15 with a brief request that the court rejects the petition after being ordered by a judge. It stated that the regulatory process may take years and that Coinbase’s demand was excessive.

However, in a speech the next day, SEC Chair Gary Gensler responded to a question from the audience by claiming that the regulations for the cryptocurrency market had already been published. He was referring to the securities laws already in place.

Coinbase requested a writ of mandamus at the end of the most recent filing in order to compel the SEC to respond to its initial petition within seven days. If not, the SEC should be required to explain its holdup, set a timeframe for its answer, and publish updates, according to Coinbase.

On March 22, Coinbase got a Wells notice informing it that the SEC may take legal action against the company for “possible violations of securities laws.”

In the SEC’s action against Ripple, the judge recently rejected the SEC’s request to seal any papers relating to Hinman. The court ruled that these materials are not protected by the deliberative process privilege because they do not relate to an agency position, decision, or policy.

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