Crypto exchange Coinbase is taking legal action after the US Securities and Exchange Commission (SEC) rejected its regulatory request.
In July 2022, Coinbase petitioned the SEC to create a new regulatory framework for digital assets, but the regulator rejected the proposal, saying it disagreed with the idea that securities laws do not apply to the crypto- industry.
Says the SEC in a letter to Coinbase dated December 15, 2023:
“The Commission disagrees with the petition’s assertion that the application of existing securities statutes and regulations to crypto assets, issuers of those securities, and intermediaries in the trading, settlement, and custody of those securities is unworkable. Furthermore, the Commission has discretionary authority to determine the timing and priorities of its regulatory agenda, including with respect to discretionary rulemaking as requested in the petition.”
In response, Coinbase Chief Legal Officer Paul Grewal said say the exchange is now seeking the court’s help to review the SEC’s decision.
“Promised, promise kept: we are now on file with Third Circuit to challenge the SEC’s arbitrary and capricious dismissal of our petition for crypto regulation. We again appreciate the Court’s consideration.”
In its petition for review, Coinbase says the securities watchdog’s denial of its regulatory petition is arbitrary and capricious, an abuse of discretion and in violation of the Administrative Procedure Act (APA), which governs how federal agencies develop and issue rules.
“The Commission’s refusal to engage in rulemaking, even as it continues a campaign of regulation by enforcement against Coinbase and others that exceeds its legal authority, ignores the APA and the fundamental principles of fairness it embodies. Coinbase respectfully requests that the court declare, vacate, enjoin and set aside the injunction; direct the Commission to begin drafting regulations; and provide such additional lighting as may be appropriate.”
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