Coinbase, a leading cryptocurrency exchange, accused the U.S. Securities and Exchange Commission (SEC) of breaking the law by rejecting its rulemaking petition. The petition, rejected in December, requested clear rules regarding digital assets.
Despite the setbacks, Coinbase does not step back.
The company recently filed its opening brief in the Third Circuit Court of Appeals to appeal the SEC's decision. Coinbase had asked the agency in 2022 to use its formal rulemaking process to provide guidance for the crypto industry.
Coinbase argues that the SEC's reasoning for denying its petition was “arbitrary and capricious” and violated the Administrative Procedures Act. The company points out that although SEC Chairman Gary Gensler has encouraged companies to “just show up and sign up,” there is no clear path for exchanges to do so under current procedures.
Paul Grewal, Coinbase's Chief Legal Officer, said:
“Today, Coinbase filed our opening brief in the Third Circuit Court of Appeals challenging the SEC's denial of our rulemaking petition. “The SEC's denial is arbitrary and capricious, an abuse of discretion, and a violation of the Administrative Procedures Act.”
The official also explained that despite the numerous legitimate concerns raised in Coinbase's petition, there is no clear reason for the SEC's denial to remain inactive:
“For years, the SEC has recognized the limits of its authority over digital assets and has asked Congress to give it additional authority to regulate our industry. “Then, almost overnight, the SEC decided it already had the authority and launched a massive enforcement campaign against the industry in which its interpretation of the law continued to change every week.”
Coinbase argues that even if it believes the SEC could legally assert new authority over digital assets today, it should explain why in a rulemaking process and give the public a chance to understand and challenge that view. The company believes that the SEC's disjointed regulation of the crypto industry with its enforcement approach is detrimental to both American consumers and innovation.
*This is not investment advice.
