Coinbase has publicly criticized the Securities and Exchange Commission (SEC) for their recent rejection of a rulemaking petition, going so far as to call the decision “arbitrary and capricious.” This scathing rebuke was delivered in a formal petition filed on Mar. 11 with the US Court of Appeals for the Third Circuit.
In their petition, Coinbase accuses the SEC of abusing its discretion and violating the Administrative Procedures Act by failing to provide substantive reasons for denying the petition. According to Coinbase’s legal chief, Paul Grewal, the SEC’s response was woefully lacking in justification, leaving them without a clear understanding of why their concerns were dismissed.
Coinbase argues that the SEC’s reluctance to establish clear rules governing digital assets creates confusion and hinders the growth of the industry. They point out that the SEC’s focus on enforcement actions rather than regulatory clarity is detrimental to both American consumers and innovation within the crypto space.
Despite allegations from the SEC, Coinbase asserts that it has not registered as a national securities exchange or alternative trading system because it does not deal in securities on its platform. They emphasize the lack of definitive guidelines from the SEC on the application of securities laws to digital assets, further fueling the uncertainty surrounding the regulatory landscape.
The Key Argument
According to Coinbase, the SEC does not have jurisdiction over digital assets due to the absence of a comprehensive regulatory framework for these assets. Grewal insists that if the SEC believes it has the authority to regulate digital assets, they must undergo a formal rulemaking process to justify their stance and allow for public scrutiny and challenge – a step that has been noticeably absent in this case.