- Coinbase has filed a lawsuit against the Securities and Exchange Commission.
- The exchange accused the commission of refusing to establish clear regulatory standards for the crypto industry.
- The commission is currently involved in year-long legal battles with several crypto entities.
Over the past year, the US Securities and Exchange Commission (SEC) has been scrutinized for its hostile actions against the crypto industry, spurring questions about its authority over the asset class.
Last July, crypto exchange Coinbase filed a petition with the commission, seeking to establish a tailored regulatory framework for the industry. However, the SEC rejected the proposal, deeming it ‘unwarranted’ and asserting that existing securities laws were sufficient for overseeing crypto assets.
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The rejection has disappointed Coinbase and prompted the exchange to respond with a new lawsuit.
Coinbase Calls SEC Out
In an opening brief filed at the US Court of Appeals for the Third Circuit on Monday, Coinbase contested the SEC’s dismissal of its petition, arguing against the commission’s “arbitrary” refusal to substantiate the authority it seeks over the industry through a formal rule-making process.
The exchange emphasized the commission’s ‘regulation by enforcement campaign’ against the industry, stemming from Chair Gary Gensler’s proclamation that most digital assets are securities, despite initially indicating its limited authority over the asset class.
“After its Chair unilaterally decree his belief that most digital assets are securities, the agency swiftly pivoted by attempting to regulate them—not by rulemaking, but through enforcement, in a scorched-earth, nationwide campaign against an entire industry,” the brief stated.
Highlighting the commission’s oppressive nature, Coinbase emphasized that the SEC coerces entities to “comply with inapplicable, inapt, and still-evolving securities-law requirements” or risk facing enforcement actions, even without providing a clear path to do so.
The exchange has now called on the court to vacate the commission’s decision and mandate the commencement of a long-overdue rule-making process, a decision necessary to halt the continuation of the commission’s hostile actions.
SEC vs. Coinbase and Other Crypto Exchanges
From Coinbase to Ripple, Kraken, and Binance, several crypto firms have felt the burn of the regulatory commission in the past years.
In December 2020, the SEC commenced its legal actions against Ripple, accusing the firm of illegally raising over $1.3 billion through the sales of unregistered securities. The legal battle, which is still ongoing, took several turns, including the accusation that the Ripple CEO, Brad Garlinghouse, engaged in personal unregistered XRP transactions worth approximately $600 million.
Shifting the focus to exchanges, the commission launched separate lawsuits against Binance and Coinbase in June 2023, alleging the operation of unregistered securities trading platforms and violating U.S. securities laws.
Bolstering its regulatory actions, the SEC proceeded with lawsuits against Kraken later in the year, accusing the exchange of registration violations despite a $30 million settlement.
Each of the commission’s victims has taken a firm stance against its claims, filing counter-lawsuits and seeking the dismissal of the lawsuits.
On the Flipside
- SEC Chair Gary Gensler has come under the scrutiny of United States policymakers, who accuse the commission head of impeding the industry’s growth through hostile actions.
- The broader regulatory environment in the US remains undefined, with influential political figures such as Senator Warren constantly criticizing the asset class.
- The SEC has been accused of overstepping authority in its legal case against Binance.
Why This Matters
Coinbase’s efforts to reinstate its petition to the SEC align with the broader calls for clearer regulatory standards for the crypto industry. These standards are necessary to provide clarity for market participants and foster a more collaborative relationship between regulators and entities.
Read more about the SEC’s enforcement actions against Coinbase:
SEC Bolsters Coinbase Lawsuit with Insider Trading Ruling
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