In a crypto world filled with villains, Coinbase has always cast itself as the good guy—a company that follows the rules and has worked with regulators and law enforcement since day one. So when the good guy of crypto decides to sue the federal government, it's worth paying attention.
On Monday, Coinbase filed suit against the Securities and Exchange Commission, asking a federal appeals court to issue an order instructing the agency to do its job—which in this case, says Coinbase, is to answer the company's petition seeking clearer regulations.
Coinbase has a point here. Even though "the need for regulatory clarity" is a talking point that the industry will shout at anyone who will listen, Coinbase and other crypto firms are right to complain about the SEC's behavior. In the last two years, the agency has been filing lawsuits and extracting settlements that presume an unresolved legal question—whether or not a token is a security—has been resolved. Companies, like individuals, are entitled to hear from the state what is or isn't allowed, especially when the future of their business is at stake. It's called the rule of law.
But just because you're right doesn't always mean you get to win. Even though judges decide cases through a prism of law, personal biases slip in and, right now, it's not hard to imagine that at least some of the judges on the Third Circuit, which is deciding the case, view crypto in a poor light. This could color their decision as to whether, as Coinbase claims, the SEC needs to get on with issuing rules for the crypto industry. The judges may conclude that the agency needs more time, or perhaps they will agree with the SEC that its rules are plenty clear enough.
Coinbase's lawyer told Fortune that, even if the court sides with the SEC, this lawsuit is just an opening salvo that will give it standing to sue over broader issues. This is a sign that the company is willing to raise the stakes as it digs in for a prolonged legal fight. This is brave but also shows that Coinbase has its back against the wall and that it has no other choice but to battle the federal government—and that's not a position any company wants to find itself in.
Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts
