Coinbase, major player in cryptocurrency exchanges, has taken a significant step in its legal battle with the Securities and Exchange Commission (SEC). Recently, Coinbase’s legal team submitted an opening brief to the Third Circuit Court of Appeals, aiming to review and overturn the SEC’s denial while pushing for the initiation of a comprehensive rulemaking process.
Read more about this below.
What’s Behind the Regulatory Dispute?
Coinbase argues that the SEC is overreaching its authority by imposing new regulations on the ever-evolving digital assets industry. The exchange claims that the SEC is enforcing resolutions without providing a regulatory framework for these digital coins, which, according to Coinbase, violates the SEC’s jurisdiction.
The absence of a clear regulatory framework, as highlighted by Coinbase, poses a significant challenge for the crypto industry. This argument revolves around the idea that crypto firms are being compelled to comply with unspecified and unknown rules and regulations.
Read More: Coinbase Questions SEC’s “Security” Label, Seeks Clearer Crypto Rules
Dissenting Voices Grow Louder
In a crucial decision, the SEC, through a 3 to 2 vote by Commissioners, denied Coinbase’s petition for rulemaking in December 2023. SEC Chairman Gary Gensler stated that existing rules covered Bitcoin ETFs adequately, and no new rules were necessary.
However, Commissioners Hester Peirce and Mark Uyeda, in a joint dissenting opinion, stressed the need to address new technologies and innovations. This dissenting perspective emphasizes the SEC’s role in handling emerging issues raised by crypto technologies.
Coinbase promptly responded with an appeal, labeling the SEC’s decision as an “abuse and contrary to law” and a violation of the Administrative Procedure Act.
The Regulatory Challenge
Coinbase’s legal filing exposes what they call a regulatory “Catch-22” for digital asset firms. The SEC mandates compliance without establishing clear and feasible regulations through necessary rulemaking.
Coinbase argues that this regulatory uncertainty not only hampers industry growth but also leaves firms in a precarious position, uncertain about navigating the regulatory landscape.
Did You Know? Coinbase CLO Uses “Bump Stock” Gun Case Against SEC, Questions Unfair Tactics
Legal Struggles Aren’t Over Yet!
Coinbase’s legal battles extend beyond the Third Circuit Court of Appeals. In a parallel challenge, the SEC has sued Coinbase in New York, alleging the operation as an unregistered broker, exchange, and clearing agency. Legal proceedings are ongoing, with Coinbase making oral arguments in January related to its motion to dismiss the suit.
The outcome, awaited by presiding Judge Katherine Polk Failla, is yet to be determined.
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