-
U.S.
crypto
exchange
Coinbase
has
filed
an
action
against
the
Securities
and
Exchange
Commission,
accusing
the
agency
of
behaving
arbitrarily
and
capriciously
in
its
refusal
to
tailor
rules
to
clarify
oversight
of
the
industry. -
This
case
is
a
response
to
the
SEC’s
denial
of
the
company’s
formal
petition
for
rulemaking,
again
putting
an
important
question
for
the
future
of
crypto
regulation
before
the
courts.
Coinbase
Inc.
(COIN)
has
accused
the
U.S.
Securities
and
Exchange
Commission
of
ignoring
the
law
when
it
rebuffed
the
company’s
formal
petition
for
crypto
rules,
according
to
a
filing
Monday
in
the
U.S.
Court
of
Appeals
for
the
Third
Circuit.
Lawyers
for
Coinbase
are
arguing
that
the
securities
regulator
has
acted
arbitrarily
and
capriciously
when
it
claims
authority
over
crypto
assets
while
also
declining
to
write
new
regulations
on
how
those
assets
should
be
treated.
Instead,
the
agency
steered
its
oversight
of
digital
assets
through
its
enforcement
actions,
the
company
argued
in
the
opening
brief
of
its
lawsuit.
When
the
SEC
rejected
the
Coinbase
petition
in
December,
it
didn’t
offer
much
of
an
explanation
for
why
it
won’t
write
crypto-specific
regulations,
the
exchange’s
lawyers
are
also
arguing.
SEC
Chair
Gary
Gensler,
who
made
a
statement
when
his
agency
rejected
the
Coinbase
petition,
argued
that
the
regulator
has
been
working
on
crypto
rules
–
even
if
they’re
not
the
rules
the
industry
wants
–
and
that
“it
is
important
to
maintain
commission
discretion
in
setting
its
own
rulemaking
priorities.”
Coinbase’s
chief
legal
officer,
Paul
Grewal,
posted
Monday
on
X
that
the
SEC
owes
the
public
an
explanation
and
a
chance
to
weigh
in
on
how
it’s
using
its
powers,
saying,
“if
you
go
back
and
read
the
SEC’s
perfunctory
denial,
you’ll
be
hard
pressed
to
find
an
actual
reason
for
its
inaction.”
The
company’s
lawsuit
is
aimed
toward
forcing
that
answer.
“The
SEC
demands
that
the
industry
comply
with
inapplicable,
inapt
and
still-evolving
securities-law
requirements
or
else
join
the
many
companies
now
facing
enforcement
actions
–
including
Coinbase,”
the
company
wrote
in
its
brief.
“Yet
the
SEC
refuses
to
conduct
the
rulemaking
needed
to
set
stable
standards,
to
show
how
it
believes
compliance
with
those
irrelevant
requirements
is
even
possible
and
to
provide
a
path
to
do
so.”
While
this
week’s
latest
legal
challenge
contends
the
regulator
has
failed
to
properly
regulate
crypto,
it’s
not
directly
tied
to
Coinbase’s
epic
court
fight
with
the
SEC
that
could
eventually
help
steer
the
course
of
the
treatment
of
crypto
exchanges
under
U.S.
securities
law.
In
that
case,
the
SEC
has
accused
Coinbase
of
illegally
running
an
unregistered
exchange
that
lists
unregistered
crypto
securities.
One
thing
the
disputes
have
in
common
is
the
SEC’s
unwillingness
to
formally
define
what
makes
a
crypto
security
outside
of
the
explanations
the
agency
provides
in
its
enforcement
actions.
That
question
isn’t
answered
in
any
of
the
crypto
rulemaking
efforts
the
SEC
offers
as
proof
that
it’s
already
forming
crypto
policy.
The
agency
has
been
working
on
a
few
major
rules
that
could
–
if
they
survive
potential
court
challenges
–
have
dramatic
effects
on
how
the
industry
does
business.
Those
rules
include
proposals
to
overhaul
the
SEC’s
definition
of
exchanges
to
rope
in
crypto
platforms
and
to
require
that
investment
advisors
use
so-called
qualified
custodians
to
park
their
customers’
crypto,
and
a
rule
that
it
recently
finalized
to
expand
its
definition
of
dealers
in
a
way
that
folded
in
decentralized
finance
(DeFi)
operations.
Coinbase
is
requesting
the
federal
circuit
court
throw
out
the
SEC’s
earlier
denial
of
its
petition
and
order
the
SEC
to
get
started
on
new
crypto
rulemaking,
or
at
least
to
fully
explain
its
position.
A
spokesperson
for
the
SEC
declined
to
comment
on
the
new
suit.
The
SEC
has
spent
a
considerable
time
in
court
on
crypto
matters,
and
its
record
of
judgements
is
–
so
far
–
a
mixed
bag.
It
lost
badly
in
disputes
with
Ripple
and
Grayscale
(leading
to
the
approval
of
spot
bitcoin
exchange-traded
funds),
but
it’s
prevailed
in
others,
including
a
recent
ruling
in
an
insider-trading
case
tied
to
a
former
Coinbase
employee.
In
that
case,
a
judge
in
the
U.S.
District
Court
for
the
Western
District
of
Washington
decided
the
crypto
assets
in
that
matter
were
unregistered
securities.
Even
as
the
industry
follows
each
court
outcome
with
keen
interest,
the
cases
–
such
as
Ripple’s
–
are
likely
to
continue
to
move
through
appeals,
and
earlier
outcomes
could
be
reversed
as
the
disputes
rise
toward
potential
consideration
by
the
U.S.
Supreme
Court.
UPDATE
(March
11,
2024,
21:02
UTC):
Adds
quote
from
Coinbase
filing.
UPDATE
(March
11,
2024,
21:09
UTC):
Adds
comment
from
Coinbase
Chief
Legal
Officer
Paul
Grewal.
UPDATE
(March
11,
2024,
21:58
UTC):
Adds
Coinbase’s
request
to
the
court.
UPDATE
(March
11,
2024,
22:43
UTC):
Adds
SEC
response.
