Coinbase Says SEC’s Reason for Rejecting Crypto Rulemaking ‘Doesn’t Cut It’

Crypto exchange Coinbase continues its legal battle against the United States Securities and Exchange Commission, a court asking the agency to start a “long overdue” process to develop regulations for the crypto industry.

In an opening brief to the Third Circuit Court of Appeals on March 11, Coinbase argued that the SEC violated the Administrative Procedures Act (APA) — which governs how agencies can issue rules — when it denied the exchange's July 2022 petition and requested that the SEC issue crypto rules. I don't give.

Coinbase said the regulator's reason for refusing to rule — where SEC Chairman Gary Gensler has argued that existing securities laws don't work with crypto — “won't cut it” and that it “needs to provide reasonable justification for its refusal to engage in regulation.”

The denial was “arbitrary and frivolous” because the SEC failed to explain how securities laws apply to crypto.[enforced] “Force those laws” by suing several crypto companies for securities law violations, according to Coinbase.

Coinbase asked the court to grant the petition for review, dismiss the SEC's denial, and compel the rule to begin the rulemaking process.

In a March 11 post, Paul Grewal, Coinbase's chief legal officer, wrote that “if the SEC believes it can (and cannot) legally assert new powers over digital assets today, it needs to explain why in the rulemaking process and give it to the public.” An opportunity to understand and challenge that attitude.”

The SEC reversed the requested authority

Coinbase's 78-page brief says the SEC has “suddenly changed its position” when it comes to crypto.

Earlier, the SEC said it had “limited authority” over crypto and there was a legal “lack of transparency”, but later the agency said it had enough authority to police crypto, Coinbase claims.

The exchange did not have the power to change the method because the SEC needed approval from Congress – Coinbase, Kraken, Binance and others argued to dismiss the SEC's charges against them.

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“If the SEC insists on mining without congressional approval, the decision should be made and implemented in accordance with the expected regulations,” Coinbase wrote.

Coinbase's appeal is a separate court biff from the SEC's June 2023 lawsuit over the SEC's rulemaking rejection that Coinbase operated as an unlicensed exchange and offered unregistered securities.

In January, Coinbase and the SEC held oral arguments on the dismissal of the exchange in that case – in which he used many of the same claims, except that Congress says that the SEC has no jurisdiction over crypto exchanges.

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