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Coinbase is accusing the U.S. Securities and Exchange Commission (SEC) of breaking the law by refusing to participate in rulemaking for the cryptocurrency industry.
In an opening brief filed with the Third Circuit Court of Appeals on March 11, Coinbase accused the SEC of acting arbitrarily and capriciously by denying the exchange’s July 2022 petition asking the regulator to enact clear cryptocurrency guidance. I did.
The SEC’s denial of Coinbase’s petition was an “abuse of discretion” and a violation of the Administrative Procedure Act, the brief said.
“The SEC violated the APA by refusing to participate in rulemaking and failing to provide a reasonable explanation for its rejection of Coinbase’s rulemaking petition,” it said. “This court should order the SEC to begin long-delayed rulemaking.”
today @Coinbase We filed an opening brief in the Third Circuit to challenge the SEC’s denial of our rulemaking petition. Summary: The SEC’s denial is arbitrary, capricious, an abuse of discretion, and a violation of the Administrative Procedure Act. 1/7 https://t.co/v09uE2OHsb
– paulgrewal.eth (@iampaulgrewal) March 11, 2024
Securities laws do not apply to cryptocurrency assets.
Last December, SEC Chairman Gary Gensler said existing securities laws could be used for cryptocurrencies.
But Coinbase said these laws were “unapplicable, inadequate, still evolving” and had no control over cryptocurrency assets.
“Forcing digital assets to submit to existing registration requirements presents an insurmountable obstacle not only to issuers, but also to digital asset platforms,” Coinbase said.
The SEC issued conflicting statements.
Coinbase is also accusing the SEC of reversing its stance on cryptocurrency regulation.
In 2018, securities regulators confirmed that cryptocurrency assets are not securities. Three years later, cryptocurrencies were classified as investment contracts.
In 2021, the SEC acknowledged the lack of market regulators for cryptocurrencies. In 2022, it changed its stance to argue that Congress gave it the authority to regulate exchanges.
Don’t want to read the entire 78-page brief in the Third Circuit’s lawsuit against the SEC? Read this to understand how broken the Commission’s approach is. pic.twitter.com/jBlEr9DKOZ
– paulgrewal.eth (@iampaulgrewal) March 11, 2024
“The SEC’s reversal and inability to clearly articulate its new position has cast a cloud over the industry for several years,” Coinbase said.
The petition comes as the country’s largest cryptocurrency exchange faces a lawsuit filed by the SEC for offering unregistered securities and operating as an unregistered platform.
Similar lawsuits have been filed against other major exchanges, including Binance and Kraken.
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