Crypto exchange Coinbase is taking legal action after the U.S. Securities and Exchange Commission (SEC) denied its rulemaking request.
In July 2022, Coinbase filed a petition with the SEC to create a new regulatory framework for digital assets, but the regulator rejected the proposal, saying that it disagreed with the idea that securities laws do not apply to the crypto industry.
Says the SEC in a letter to Coinbase dated December 15th, 2023,
“The Commission disagrees with the petition’s assertion that application of existing securities statutes and regulations to crypto asset securities, issuers of those securities, and intermediaries in the trading, settlement, and custody of those securities is unworkable. Moreover, the Commission has discretion to determine the timing and priorities of its regulatory agenda, including with respect to discretionary rulemaking such as that requested in the petition.”
In response, Coinbase chief legal officer Paul Grewal says the exchange is now seeking the assistance of the court to review the SEC’s decision.
“Promise made, promise kept: we are now on file with Third Circuit to challenge the SEC’s arbitrary and capricious denial of our petition for crypto rulemaking. We again appreciate the Court’s consideration.”
In its petition for review, Coinbase says the securities watchdog’s denial of its rulemaking petition is arbitrary and capricious, an abuse of discretion and in violation of the Administrative Procedure Act (APA), which governs how federal agencies develop and issue regulations.
“The Commission’s refusal to engage in rulemaking, even while it continues a campaign of regulation by enforcement against Coinbase and others that exceeds its statutory authority, flouts the APA and fundamental principles of fairness it embodies. Coinbase respectfully requests that the Court hold unlawful, vacate, enjoin, and set aside the Order; direct the Commission to commence rulemaking; and provide such additional relief as may be appropriate.”
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