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The US Court of Appeals for the Third Circuit raised
concerns over the Securities and Exchange Commission’s (SEC) denial of a
rulemaking petition by Coinbase. The exchange, the largest in the US, has criticized the SEC for the lack of clear rules for the industry.
Coinbase and SEC Face Off
The legal battle between Coinbase and the SEC is
before the US Court of Appeals for the Third Circuit. In 2022, Coinbase filed a
petition asking the regulator to create specific rules for crypto assets to clarify
the regulatory framework for securities based on digital platforms.
The SEC denied this request in December 2023, forcing
Coinbase to seek judicial intervention to compel the regulator to reconsider
its decision. The court’s panel of judges expressed skepticism about the SEC’s
brief, a two-page denial of Coinbase’s petition.
Coinbase’s Chief Legal Officer, Paul Grewal,
criticized the SEC’s handling of the petition. In a social media post on X,
Grewal pointed out that the SEC has refused to offer a reasonable explanation
for its denial while continuing to pursue aggressive enforcement actions
against crypto companies.
Today @coinbase made oral arguments before the Third Circuit in our case against @SECgov’s repeated arbitrary and capricious denial of our petition for rulemaking, which we originally put forward over 2 years ago. Here’s the original petition: https://t.co/k0n2wwaBU9 1/5
— paulgrewal.eth (@iampaulgrewal) September 23, 2024
The judges voiced their concerns about the lack
of clear guidance for the crypto industry. Judge Stephanos Bibas questioned how
crypto firms could be expected to comply with rules that do not align with the
nature of digital assets and decentralized protocols, Cointelegraph reported.
Bibas added that the regulator’s continuous
enforcement actions against crypto companies indicate that it has the resources
to prioritize rulemaking, raising doubts about why crypto rulemaking remains
overlooked.
SEC Defends Its Position
However, the SEC reportedly defended its denial,
pointing to other priorities and ongoing regulatory efforts as reasons for not
pursuing new rules for the crypto sector at this time. The SEC’s attorney,
Ezekiel Hill, argued that Coinbase’s desire for a rule change does not
guarantee that the regulator must act in accordance, Reuters reported.
The SEC maintains that existing regulations are
adequate and that most crypto tokens fall under securities laws, making them
subject to SEC jurisdiction. In June 2023, the SEC charged Coinbase with
operating as an unregistered securities exchange, broker, and clearing agency,
allegations that Coinbase denies.
Coinbase, as well as several other crypto companies,
have faced lawsuits from the SEC over the listing and trading of tokens that
the regulator deems securities. Coinbase, in particular, is fighting these
charges in a separate legal proceeding.
This article was written by Jared Kirui at www.financemagnates.com.
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