Coinbase recently filed a closing brief with the US Court of Appeals for the Third Circuit, challenging the SEC’s denial of its rulemaking petition. The crux of the case revolves around a single sentence in the SEC’s order that “disagreed” with Coinbase’s assertion that current SEC rules are unworkable for digital asset firms. This lack of reasoned decision-making, according to Coinbase, should lead to the vacating of the regulator’s order.
Coinbase’s Chief Legal Officer, Paul Grewal, took to social media to emphasize the significance of this legal battle. He criticized the SEC for failing to provide substantive reasoning behind its disagreement with Coinbase’s position. Grewal highlighted the broader implications of the SEC’s stance, arguing that the agency is overstepping its jurisdiction without clear authorization from Congress and without establishing clear rules for the growing digital asset industry.
Furthermore, Grewal expressed concerns that the SEC is attempting to stifle the digital asset industry by refusing to provide the necessary rules that industry players have been requesting. He accused the SEC of being bent on choking the industry and tightening its grip without offering clear guidelines. This sentiment is echoed in Coinbase’s legal brief, which suggests that the SEC’s actions are a deliberate effort to cripple the industry by enforcing compliance with regulations that are deemed unworkable.
Coinbase argues that the SEC’s failure to engage in proper rulemaking violates the Administrative Procedure Act (APA), which mandates agencies to undertake rulemaking for significant policy changes. The exchange maintains that the SEC’s policies on digital assets have been inconsistent and lack a coherent legal standard, making compliance virtually impossible for industry participants. The filing asserts that the SEC’s inconsistent positions over the years have created uncertainty and confusion within the industry.
Coinbase’s legal team contends that the SEC must engage in rulemaking to establish clear and workable standards for digital asset firms. The current regulatory stance, according to Coinbase, renders the entire digital asset industry non-compliant with existing rules, a situation that is deemed “untenable and unfair.” The case has attracted significant attention from the crypto community and regulatory observers, as it could have substantial implications for the regulation of digital assets in the US.
The pending decision by the Third Circuit on this matter is highly anticipated, as it has the potential to shape the future of digital asset regulation and determine the extent of the SEC’s authority over the industry. The ongoing legal battle between Coinbase and the SEC underscores the tension between the digital assets industry and regulatory bodies as industry players seek clarity and fair treatment under the law.