Coinbase Request for Clarity on Crypto Rules ‘Should Be Denied’, Says SEC
The battle between crypto exchange Coinbase and the U.S. Securities and Exchange Commission (SEC) rages on.
The latest twist occurred on Monday when the SEC sought a court order to dismiss Coinbase’s plea for the agency to clarify its stance on crypto regulations.
The exchange publicly voiced its grievances against the American financial watchdog on April 27, also revealing that it had initiated legal proceedings.
The crux of their argument was the SEC’s non-response to a petition filed in July 2022. The petition urged the SEC to clarify whether the existing regulatory frameworks for securities should extend to the cryptocurrency industry.
Coinbase petitioned a federal judge to compel the regulator to respond.
The firm’s Chief Legal Officer Paul Grewal expressed the company’s frustration in a Twitter thread last month.
“Coinbase does not take any litigation lightly, especially when it’s with one of our regulators,” he wrote. “Yet we, like other companies in the industry, are facing potential punitive actions from the SEC without clear understanding of how the SEC interprets the law in relation to our business.”
The SEC finally responded on Monday, dismissing Coinbase’s request outright.
“Coinbase’s preference for faster or different regulatory action by the commission does not entitle it to extraordinary relief from this court,” wrote the Commission’s lawyers in the filing. “The petition should be denied.”
Reacting to the SEC’s statement, Grewal commented that it was “the first time the SEC has transparently communicated its stance on setting rules for the crypto industry.”
He also expressed disappointment at the SEC’s timeline for rule implementation and its apparent lack of urgency.
Grewal further stated that the SEC’s answer “reinforces Coinbase’s longstanding concern that our industry does not have clarity on what the SEC may consider to be within or outside its jurisdiction at any time, and it is likely to continue changing its mind along the way.”
He concluded by announcing that Coinbase plans to respond officially to the SEC in the following week.
Coinbase versus the SEC
This incident adds a new chapter to the ongoing conflict between Coinbase and the SEC, which escalated in March when Coinbase received a Wells notice from the SEC.
This formal warning indicated the SEC’s intention to take legal action against Coinbase.
The friction between Coinbase and the SEC can be traced back to 2021 when the SEC first warned it would sue the company over its plans to launch a lending product. The platform ultimately shelved the product due to the threat of legal action.
Coinbase’s CEO, Brian Armstrong, has consistently criticized the lack of regulatory clarity, even suggesting that he might move the company out of the United States in the absence of a clear SEC stance within a few years.