Coinbase, a leading cryptocurrency exchange based in the U.S., is pressing ahead with its efforts to secure clear regulatory guidelines for cryptocurrencies classified as securities. Following the United States Securities and Exchange Commission’s (SEC) denial of Coinbase’s petition for rulemaking on cryptocurrency on December 15, the exchange promptly filed an appeal.
Coinbase Chief Legal Officer Paul Grewal vowed immediate action upon learning of the SEC’s denial. On December 18, the U.S. Third District Court of Appeals ordered the SEC to file the record of its decision by January 24, 2024.
In its appeal, Coinbase outlined the extensive process it undertook to compel the SEC to respond to its petition. The exchange characterized the SEC’s denial as “arbitrary and capricious, an abuse of discretion, and contrary to law, in violation of the Administrative Procedure Act.”
Coinbase further argued that the SEC’s refusal to engage in rulemaking, while simultaneously pursuing enforcement actions against Coinbase and others that exceed its statutory authority, violates the Administrative Procedure Act and fundamental principles of fairness.
The SEC’s denial letter criticized Coinbase’s petition for lacking “text or the substance of any proposed rule,” as required for petitioning. It also disagreed with the petition’s claim that existing regulations were “unworkable” and asserted that the agency has discretion over the priority and timing of regulation. The denial drew criticism from the crypto community.
SEC Chair Gary Gensler released a statement shortly after the official denial, stating:
“I was pleased to support the Commission’s decision for three reasons. First, existing laws and regulations apply to the crypto securities markets. Second, the SEC addresses the crypto securities markets through rulemaking as well. Third, it is important to maintain Commission discretion in setting its own rulemaking priorities.”
Coinbase, headquartered in San Francisco, has actively supported the cryptocurrency industry through political donations, lobbying efforts, and public advocacy. In June, the SEC sued Coinbase for alleged securities violations.
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