Coinbase Appeals SEC’s Denial of Crypto Regulations, Continues Legal Battle
Can Coinbase’s Legal Challenge Change the Future of Crypto Regulation?
Key Takeaways
- Coinbase and the SEC are fighting in federal appeals court as the crypto exchange disputes the SEC’s authority over cryptocurrency.
- Coinbase has filed an appeal to the SEC’s denial of its 2022 petition, demanding independent regulations for crypto.
- Coinbase vows to continue the fight against the SEC’s unjust crypto overreach.
Crypto exchange Coinbase is leading the fight against the U.S. Securities and Exchange Commission’s (SEC) crypto overreach and “unlawful” enforcement actions.
According to a Reuters report , the crypto exchange challenged the securities regulators’ denial to formulate new crypto regulations in a federal appeals court on Monday.
Coinbase Claims SEC Has Made It Impossible to Operate
The largest American crypto exchange filed a lawsuit against the SEC last year, asking the regulator to act upon its 2022 petition to formulate independent crypto rules.
The SEC denied Coinbase’s petition in December 2023, claiming the current rules are sufficient for the crypto industry to adhere to.
Coinbase has now challenged the SEC’s denial in the Philadelphia appeals court. Addressing a three-judge panel, Coinbase’s legal counsel claimed that the SEC has made it nearly impossible for Coinbase to operate in the U.S.
It claimed that the SEC has been arbitrary and capricious in its crypto regulations and accused the agency of not offering sufficient information to register with the agency and follow the necessary regulations.
The exchange also highlighted how the SEC has carried out several enforcement actions against crypto companies for violating rules that the agency failed to clarify.
Existing Laws Are Enough, Says SEC
The SEC’s attorney made a similar case to the one agency used to reject Coinbase’s petition. Legal counsel stated that the government does not need to develop additional crypto regulations because plenty already exists. He added that no exceptional circumstances in this case would call for such an “extraordinary remedy.”
“If Coinbase wants to arrange its business in a way that does not comply with the existing regulatory framework, that does not establish a right to have the framework adapted to meet their business,” said SEC lawyer Ezekiel Hill.
SEC regulation by enforcement approach has been one of the biggest concerns for crypto companies over the past four years. The federal regulatory has brought over a dozen lawsuits against crypto companies for violations of federal securities regulations. However, the agency has lost a significant chunk of these cases in court, the most prominent being Ripple (XRP).
After listening to both parties’ arguments, the three-panel judge ruled that the SEC can determine the priorities for rulemaking. However, at the same time, the judge questioned the SEC’s approach to crypto.
Most recently, the SEC admitted that using “crypto securities” was merely a shorthand and didn’t imply that all crypto tokens are securities. The agency promised to avoid using the term in the future. In court, an SEC lawyer reiterated the same, claiming that “digital asset is not a security” but “digital asset can be the subject of an investment contract.”
Coinbase Vows to Continue Fighting
In an X post, Coinbase chief legal officer Paul Grewal gave an update about their legal appeal battle in court. Grewal said the SEC’s regulation by enforcement approach damages “American consumers, innovation, US competitiveness, and our national security.”
“Coinbase is determined to leave no stone unturned in our efforts to get clarity for our industry and the millions of Americans who hold crypto,” he added.
The crypto exchange has been leading the charge in challenging the SEC’s overreach and enforcement actions against crypto companies. It recently hired Ryan VanGrack as its vice president of Litigation . VanGrack will overlook regulatory probes and civil litigation.
Besides its legal battle against the SEC, Coinbase is fighting a political battle to support pro-crypto senators and policymakers. Coinbase, along with Ripple, is one of the biggest corporate donors in the US Presidential elections.
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