In a major development for the cryptocurrency industry, the United States Court of Appeals for the Third Circuit requested the US Securities and Exchange Commission (SEC) to clarify its response to a rulemaking petition submitted by leading cryptocurrency exchange Coinbase (COIN). The court instructed the SEC to explain within seven days whether Coinbase intends to reject its request, provide reasons for such a decision, or specify a timeline for reaching a decision.
Coinbase corners SEC
In April, Coinbase filed an Administrative Procedure Act appeal seeking court intervention to force the SEC to respond to its 2022 petition for official rulemaking in the crypto-assets industry. The exchange argued that current regulatory requirements are not suitable for the unique characteristics of crypto assets. Paul Grewal, Coinbase’s Chief Legal Officer, stated the importance of regulatory clarity, saying, “Rules of the road must precede enforcement actions, whether it’s legislation or rulemaking, or both. That’s why we petitioned the SEC about a year ago to make the rule,” he said.
This latest development coincides with the ongoing lawsuit filed by the SEC against Coinbase accusing the exchange of operating an unregistered securities exchange. Grewal emphasized that he believes the SEC’s lawsuit against the industry, including the lawsuit against Coinbase, may have been influenced by the regulator’s expectation to reject rulemaking petitions. “We continue to believe that the SEC would not have been able to file lawsuits against our industry like the lawsuit filed against us today if it had not decided to reject our rulemaking petition,” he said.
SEC needs to make statements to the stock market
In addition to clarifying Coinbase’s stance on the rulemaking petition, the SEC also needs to provide an explanation as to why the court should not retain oversight of the case. Grewal emphasized Coinbase’s legal right to challenge a possible refusal of the rulemaking petition in court if the SEC’s response is negative. “If the SEC’s answer to our rulemaking petition is ‘no’, then by law they have to tell us that because we have the right to challenge that ‘no’ in court. And there are serious questions to be asked.” says.
This court decision marks an important turning point in the relationship between regulators and the rapidly evolving cryptocurrency industry. The outcome of Coinbase’s petition and the SEC’s subsequent response will likely have far-reaching implications for crypto-asset regulations in the United States. The cryptocurrency community and industry stakeholders are eagerly awaiting the SEC’s response as they seek greater clarity and regulatory certainty, which is vital to foster innovation and development in the emerging crypto-asset space.
