Coinbase sues SEC
Coinbase has filed a lawsuit against the Securities and Exchange Commission (SEC), requesting that the regulator be forced to publicly share its response to a petition on whether it would allow the crypto industry to be regulated using existing SEC frameworks.
In July 2022, Coinbase submitted a petition asking that the SEC “propose and adopt rules to govern the regulation of securities that are offered and traded via digitally native methods.” The SEC never responded to the petition, and since January, it has taken action against various crypto exchanges, including Bittrex, Gemini, and Genesis, as well as individual actors accused of manipulating crypto assets. Coinbase’s move is its first formal salvo against the regulator, just over a month after it was warned of pending legal action through a Wells notice. Coinbase claims that regulatory clarity is overdue for the industry and that it has not been told how the SEC believes the law applies to its business.
The petition filed by Coinbase in the U.S. Court of Appeals for the Third Circuit is an escalation of tensions with the SEC, which has been aggressively ramping up enforcement actions and warnings against crypto firms, including Coinbase. Brian Armstrong, co-founder and CEO of Coinbase, has stated that the exchange may consider relocating its headquarters outside the U.S. unless the country changes its approach to regulation. Coinbase chief legal officer Paul Grewal believes that the SEC is violating the law, and the firm feels it has no choice but to take the SEC to court. The move by Coinbase is part of its mounting legal action to defend the company and the sector’s survival in the U.S., where crypto has come under increasing pressure from regulators.
The U.S. crypto industry is unhappy with agencies such as the SEC, which are engaging in “regulation by enforcement” instead of codifying rules to govern the sector. Lawmakers are struggling to come up with a regulatory framework for the crypto industry, and the lack of clarity is stifling innovation. The whole industry is urging regulators to provide clear rules to govern the industry, which will enable innovation and help protect investors. Coinbase is not taking litigation lightly, especially when it relates to one of its regulators. It believes that regulatory clarity is overdue for the industry and is willing to go to court to defend itself and the industry.
Further Reading:
- CNBC: Coinbase sues SEC after months of silence from federal regulator (published: 2023.04.24)
- Techcrunch: Crypto exchange Coinbase sues SEC over rulemaking petition (published: 2023.04.25)
- Fortune: New Coinbase court challenge adds to mounting legal battle: ‘We’re absolutely convinced the SEC is violating the law’ (published: 2023.04.25)
