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Coinbase accuses the US Securities and Exchange Commission (SEC) of breaking the law by refusing to participate in rule-making for the crypto industry.
In a opening discount Coinbase, filed with the Third Circuit Appeals Court on March 11, accuses the SEC of acting arbitrarily and capriciously by denying the exchange’s July 2022 petition asking the regulator to set clear crypto guidelines.
The SEC’s denial of Coinbase’s petition is also an “abuse of discretion” and violates the Administrative Procedure Act, the letter said.
“The SEC violated the APA by refusing to participate in rulemaking and by failing to provide a reasoned explanation for the denial of Coinbase’s petition,” the report said. “This Court should order the SEC to begin long-overdue rulemaking.”
Today @muntbasis filed our opening brief in the Third Circuit challenging the SEC’s denial of our rulemaking petition. Tl;dr: The SEC’s denial is arbitrary and capricious, an abuse of discretion, and a violation of the Administrative Procedures Act. 1/7 https://t.co/v09uE2OHsb
— paulgrewal.eth (@iampaulgrewal) March 11, 2024
Securities laws do not apply to crypto assets
Last December, SEC Chairman Gary Gensler said existing securities laws could be used for cryptocurrencies.
But Coinbase said these laws were “inapplicable, inappropriate and still evolving” and could not apply to crypto assets.
“Forcing digital assets into existing registration requirements creates insurmountable hurdles not only for issuers, but also for digital asset platforms,” Coinbase said.
SEC has made conflicting statements
Coinbase also accuses the SEC of distorting its position on regulating cryptocurrencies.
In 2018, the securities regulator confirmed that crypto assets were not securities. Three years later, it classified cryptocurrencies as an investment contract.
In 2021, the SEC admitted that there was no market regulator for cryptocurrencies. In 2022, it changed its tune, claiming that Congress had given it the mandate to regulate the exchanges.
Don’t you want to read our full 78-page brief in our Third Circuit lawsuit against the SEC? Just read this to understand how broken the Commission’s approach has been. pic.twitter.com/jBlEr9DKOZ
— paulgrewal.eth (@iampaulgrewal) March 11, 2024
“The SEC’s about-face and failure to articulate its new position has left a cloud over the industry for years,” Coinbase said.
The petition comes as the largest US cryptocurrency exchange faces a lawsuit filed by the SEC accusing it of offering unregistered securities and operating as an unregistered platform.
Similar lawsuits have been filed against other leading exchanges, including Binance and Kraken.
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