July 24, 2024
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SEC Responds to Coinbase’s Petition for Clear Crypto Regulation

Recently, the U.S. Securities and Exchange Commission (SEC) has issued a formal response in court regarding Coinbase’s petition for transparent regulation in the cryptocurrency industry. The SEC stated that any rulemaking process could potentially span several years, emphasizing that enforcement actions would persist in the interim.


Court documents filed on May 15 reveal the SEC’s argument, asserting that it is not obligated to fulfill Coinbase’s outlined requirements within the petition. Furthermore, the SEC contends that Coinbase’s call for comprehensive reforms and expedited rule-making is impractical given the limited timeframe.

Seeking to deny Coinbase’s petition for mandamus, the securities regulator argues that mandamus is an “extraordinary remedy” and asserts that Coinbase “lacks the ability to demonstrate a legitimate right” to such relief.

Coinbase’s Chief Legal Officer, Paul Grewal, took to Twitter, noting that this filing might be the first instance where the SEC elaborates on its stance regarding the establishment of regulations for the crypto industry. Grewal also emphasized the need for further clarification on numerous matters.


Grewal said, “The SEC informed the court that rulemaking might require a considerable amount of time, and they are in no hurry.” He added, “The SEC admitted that while enforcement actions would serve as a temporary substitute for rulemaking, these actions might eventually provide guidance for future rulemaking initiatives that are yet to be planned.”


Interestingly, just hours before the filing, SEC Chairman Gary Gensler delivered a keynote speech at the Financial Markets Conference, where he argued that good rules for the crypto industry had already been published.

In its recent filing, the SEC distanced itself from any public comments and views expressed by its chair, specifically regarding Gensler’s classification of most cryptocurrencies as securities. Grewal highlighted, “The SEC stated that Chair Gensler’s public statements do not represent formal guidance or policy statements from the SEC, and the public should not rely on them as such.”

Ultimately, the regulator contends that it should not be compelled to engage in rulemaking for the crypto industry. The SEC stated, “Neither the securities laws nor the Administrative Procedure Act impose an obligation on the Securities and Exchange Commission to issue extensive new regulations concerning ‘digital assets’ as requested by Coinbase.” Additionally, the SEC notes that Coinbase’s submissions highlight the complexity of considering the various paths suggested. Despite this, Coinbase filed its rulemaking petition less than ten months ago, supplemented it just three months ago, and recently sought to supplement the record again.


The SEC’s argument for seeking denial is partly based on the assertion that Coinbase cannot convincingly demonstrate any harm caused by the SEC’s lack of action on the petition since its initial filing. Furthermore, the SEC argues that its recent enforcement actions within the crypto sector do not indicate a decision to abstain from rulemaking.

“The Commission continues to review Coinbase’s petition in the normal course of action,” the agency affirmed.

Grewal argued, “Overall, the SEC’s response reinforces Coinbase’s longstanding concern that our industry lacks clarity regarding the SEC’s jurisdiction, and that their stance is prone to change along the way.”