Regulation
Coinbase criticizes SEC in closing briefing for refusal to provide clear regulation
CoinBase filed a closing brief with the U.S. Court of Appeals for the Third Circuit on May 31, challenging the SEC’s denial of its rulemaking petition.
The case revolves around a single closing sentence in the SEC’s order, which “disagreed” with Coinbase’s assertion that the SEC’s current rules are impractical for digital asset companies.
The exchange claims that this lack of reasoned decision making should result in the regulator’s order being quashed. Additionally, Coinbase wants the court to direct the SEC to engage in regulation for the cryptocurrency industry.
Coinbase Legal Director Paul Grewal underlined the importance of this legal battle means of social communication and criticized the SEC for offering no substantive reasoning behind its disagreement. He said:
“The SEC’s order must be overturned on this basic ground alone.”
Grewal highlighted the broader implications of the SEC’s position, saying the SEC is overstepping its jurisdiction without clear authorization from Congress and without establishing clear rules for the thriving digital asset industry.
I refuse to provide rules
Grewal also expressed concern about the SEC’s approach, accusing the agency of trying to stifle the digital asset industry. He said:
“The SEC is intent on stifling the digital asset industry and refuses to provide the necessary rules the industry has requested to tighten the clampdown.”
This sentiment is echoed in Coinbase’s legal brief, which argues that the SEC’s actions are part of a deliberate effort to destroy an industry by enforcing compliance unworkable regulations.
Coinbase’s brief argues that the SEC’s failure to engage in adequate rulemaking violates the Administrative Procedure Act (APA), which requires agencies to engage in rulemaking for major policy changes.
Coinbase argues that the SEC’s policies on digital assets have been inconsistent and lack a consistent legal standard, making compliance impossible for industry participants. In short it reads:
“The SEC’s position has changed dramatically and continuously, creating uncertainty and confusion.”
The document also highlights the agency’s contradictory statements over the years and its aggressive enforcement actions, which have targeted only a subset of digital assets without clear guidance.
Unsustainable situation
Coinbase’s legal team argued that the SEC must engage in regulation establish clear and achievable standards for digital asset companies.
The note highlights that the SEC’s current position effectively renders the entire digital asset industry non-compliant with existing rules, a situation that is “untenable and unfair.”
The case has attracted a lot of attention from the crypto community and regulatory observers, as it could have far-reaching implications for the regulation of digital assets in the United States.
The Coinbase challenge illustrates the ongoing tension between the digital asset industry and regulators as the industry seeks clarity and fair treatment under the law.
The Third Circuit’s decision on this matter will be watched closely, as it has the potential to shape the future of digital asset regulation and determine the scope of the SEC’s authority over the industry.