Coinbase Vs SEC: Exchange Appeals SEC’s Denial Of Rulemaking Petition

Crypto Exchange files a lawsuit against SEC appealing the agency’s denial of its 2022 rulemaking petition on clear digital asset regulations. Coinbase Vs SEC face each other again in appeals court as exchange fights over denial of 2022 rule-making petition. The judge has vented his frustration with the SEC profiting from its infamous regulation-by-enforcement, Coinbase case reveals no clear regs on cryptos. SEC continues to ask for more time in another case against Coinbase, the discovery phase could slow down the trials until 2025.

Coinbase vs SEC is back to a federal appeals court in Philadelphia as the leading US cryptocurrency exchange continues to battle the regulator over his refusal to set new rules for digital assets. It is another round of the battle between Coinbase and the SEC, as Coinbase applied to challenge the SEC’s rejection of its rulemaking petition in February 2022.

Coinbase vs SEC lawsuit: Denial of Rulemaking Petition

In response to the Coinbase Vs SEC Coinbase has requested the commission to offer a legal framework for digital assets claiming that securities laws do not apply to the crypto market.

The ground on which the exchange has claimed inspiration is the absence of any reaction from the SEC to a petition filed in 2022 seeking clarity on what the framing of digital assets as security entails and on the sectorial structure of digital currencies.

The SEC rejected Coinbase’s request in December 2023 arguing that current regulations are adequate and opposite to the establishment of new policies. As such, the crypto exchange argues that this position means that the crypto market’s regulation remains ambiguous hence making it challenging for firms to operate in the United States.

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Court Hearing Highlights Regulatory Tensions

During the Coinbase Vs SEC case hearing, Coinbase stated that the SEC, through enforcement actions more than rulemaking, causes a lack of clarity on the legal structure. The SEC has always held the doctrine that digital tokens are within its purview and has categorized several tokens as securities; as such, it has sued several crypto companies, including Coinbase, for selling unregistered securities.

At the same time, Jake Chervinsky noted the order in the words used by the SEC even its counsel has used the terms ‘digital asset securities’ and ‘crypto asset securities’.

This contradiction led one judge to say that it gives an impression that the SEC would rather fine firms than provide guidance, a sentiment that has characterized the criticisms made by the crypto industry towards regulation by enforcement. He remarked,

Coinbase CLO and Legal Observers Weigh In

Talking about the actions taken by the SEC, Paul Grewal, the Chief Legal Officer of Coinbase stated that the agency offers no help with regards to compliance, but is happy to enforce compliance with previously nonexistent rules. The Coinbase CLO said that Coinbase will endeavour to obtain regulatory clarity for the millions holding cryptocurrencies in America adding that regulation through enforcement is detrimental to the consumer, stifles the advancement, and hampers the economy of the United States of America.

There was also a newly discovered addition to the team at the crypto exchange that saw Ryan VanGrack appointed to the new position of Vice President of Litigation in the company’s legal team. VanGrack previously served Citadel Securities where he was a General Counsel. Paul Grewal also stated that he trusts VanGrack who is representing the firm in the ongoing legal processes targeting Coinbase that it is capable of further prosecuting the SEC.

Legal analyst MetaLawMan also expressed their opinion on VanGrack’s appointment and noted that Citadel has been a staunch critic of the SEC, for instance, concerning the CAT. MetaLawMan commented,

SEC Seeks Extension in Separate Court Case Against Coinbase

During the HBO penthouse that same period, the agency moved to extend the time to complete discovery in the securities law violation suit against Coinbase and implied the discovery period should be prolonged to February 2025, after the next US presidential elections.

The agency argued that because of the discovery process that involved more than 133000 documents, the court should allow the extension.

This delay occurs at a time when SEC Chair Gary Gensler is to appear before Congress to answer questions on the SEC’s stance on cryptocurrencies. It has stirred concern on the part of the timing of the SEC as the agency continues to face pressure over its actions against the digital asset industry.