Top crypto exchange Coinbase has announced it will be challenging the decision of the securities and exchange commission (SEC) to deny the exchange’s new crypto rulemaking request.
The exchange announced this through its chief legal officer Paul Grewal said Friday. Coinbase had earlier in 2022 requested that the SEC create a new set of rules to guide the industry.
However after several months of waiting, the SEC on Friday announced it would not make any such rules, referring to them as |unwarranted”.
“Today the SEC denied Coinbase’s petition for rules for crypto,” Grewal posted on Twitter. “After 18 months of silence, we went to court to get the response the law requires. With appreciation for the Third Circuit, later today we’ll again seek its help by challenging the SEC’s abdication of its duty,” he added.
Coinbase’s request came following the pressure mounted by the SEC on the industry, especially this year. The exchange itself, alongside other top exchanges like Binance and Kraken have been dragged to court on account of various allegations.
According to Grewal, Republican SEC Commissioners Hester Peirce and Mark Uyeda disagreed with the denial and pointed to a need for dialogue between regulators and the crypto industry.
“We’re grateful that two Commissioners disagreed with the denial and called for real dialogue,” Grewal said. “We should be working together to create laws and rules that will benefit consumers and U.S. innovation, not defending lawsuits based on legal positions that change month after month.”
The SEC’s Denial
The SEC has since responded to Coinbase’s request for new crypto rules, saying it would take too long, and the industry has sufficient guidance. Affirming its position on Friday, SEC chair Gary Gensler said the industry was a small part of the capital market and resources shouldn’t be wasted on it.
“While the crypto market experiences outsize fraud, abuse, and noncompliance relative to its size, it nevertheless is a small portion of the bigger-than-$110 trillion capital markets. It is important that the Commission maintain discretion to direct focus to whichever parts of the capital markets need updated regulation,” Gensler said.
Ironically, this position is contrary to that of the commodities futures trading commission (CFTC), a sister regulatory agency. Chairman of the commission Rostin Behman has repeatedly stated that crypto assets are unique, and as such need their own separate rules to properly regulate them.
Coinbase Files Petition
Coinbase later filed a petition in for review in the U.S. Court of Appeals for the Third Circuit. The exchange is simply asking the appeal court to decide if it was right for the SEC to have denied the request to make new crypto rules.
“Coinbase’s mandamus petition thus has now achieved its stated purpose of compelling the SEC to act on Coinbase’s request for rulemaking,” according to the filing. “The Commission’s formal denial of that request makes explicit what its words and actions had long shown was the Commission’s position. By doing so, the SEC has cleared the path for judicial review that its unexplained inaction had long obstructed.”
If Coinbase wins, it will be another case in which the crypto industry has won against the SEC this year. Digital asset manager Grayscale had challenged the agency in court earlier for denying its request to convert to a Bitcoin ETF and won.
