KEY POINTS
- The regulator said Coinbase's rulemaking petition was unjustifiable
- Coinbase has said new rules were necessary for a new financial sector
- The SEC sued Coinbase in 2023, saying the crypto exchange violated securities laws
The U.S. Securities and Exchange Commission (SEC) told the court in a recent filing that cryptocurrency exchange giant Coinbase can't force it to produce new digital assets rules "from the ground up," saying its current regulations around the emerging sector were enough to keep the industry in check.
In its mid-2022 request for the SEC to "initiate new rulemaking" that should provide the crypto industry with clear regulations and a "workable regulatory framework," Coinbase said the Wall Street regulator's current rules were "unworkable" for the digital assets sector.
The SEC said in its rebuttal filing that Coinbase's request cannot be justified, adding that it was rare for courts to overturn an agency's denial of a rulemaking petition.
"Coinbase seeks the extraordinary remedy of an order from this Court requiring the Commission to engage in this otherwise discretionary rulemaking, but none of the rare and compelling circumstances that might justify such relief is present here. And the Commission's determination that the rulemaking Coinbase seeks is currently unwarranted was both reasonable and reasonably explained," the regulator said in its filing.
The regulatory agency went on to reiterate that Coinbase's request was "so substantial" that it would limit the SEC's "choices regarding competing priorities." It did say that it "may" decide to consider some of the issues raised in the petition, but it did not provide a specific timeline.
Coinbase has repeatedly said the SEC's failure to provide clear regulations for the crypto industry were leaving investors unprotected and it also hampers key players from leveraging innovations to further improve the sector.
Paul Grewal, Coinbase's chief legal officer, said Saturday that the SEC's latest response to the crypto exchange's rulemaking petition was just a rehash of "the fallacy that registration as is is 'workable.'"
In a nightcap to this busy day, @SECGov also filed their response to the Third Circuit APA challenge we brought to their refusal to pursue notice-and-comment rulemaking. Their basic response: "no additional explication is required to understand the Commission’s policy decision."…
— paulgrewal.eth (@iampaulgrewal) May 11, 2024
The parties have been going back and forth with rebuttals since last year, after the regulator filed a complaint against the crypto titan, accusing it for violating securities laws by selling unregistered securities. The crypto community has been observing the legal battle between the two as it could play a major role in the country's regulatory approach toward digital assets.
Politicians have also shown interest in the case, with Republican senator candidate for Massachusetts John Deaton filing to be the legal counsel for thousands of Coinbase customers.
