Coinbase, one of the world’s leading cryptocurrency exchanges, has taken another formal step to seek regulatory clarity from the US Securities and Exchange Commission (SEC) for the crypto industry. The company has filed a narrow action in federal court, requesting the SEC to respond to its pending rulemaking petition that asks the SEC to provide overdue guidance for the crypto industry.
Coinbase filed the petition in July 2022, and since then, over 1,700 entities and individuals have submitted comments echoing the request for clarity. The Administrative Procedure Act requires the SEC to respond to Coinbase’s rulemaking petition “within a reasonable time.” If the SEC says no to the rulemaking petition, Coinbase would be allowed to challenge that decision in court and explain why rulemaking is required.
Today, we filed a narrow action in the U.S. Circuit Court to compel the SEC to respond “yes or no” to a rulemaking petition we filed with them last July asking them to provide regulatory guidance for the crypto industry. – Paul Grewal
The action filed by Coinbase asks the court to compel the SEC to share its decision, which may feel unusual, but it is also unusual for an agency to bring enforcement actions based on a view of the law that it has not yet shared formally with the public. Coinbase is not asking the court to instruct the agency how to respond, but it is simply requesting that the SEC responds at all, which they are legally obligated to do.
The lack of regulatory clarity for the crypto industry has led to potential regulatory enforcement actions from the SEC against Coinbase and other crypto companies, even though they have not been told how the SEC believes the law applies to their business. The rulemaking process is a critical step in giving the public notice about what activities they can and cannot engage in. Until the crypto industry gets that clarity, Coinbase will continue to take every step available to seek it, which includes the legal challenge filed in court.
Coinbase believes that crypto and blockchain technology have the ability to increase economic freedom and opportunity around the world. However, the disjointed, regulation-by-enforcement approach adopted by government leaders and regulators at the federal level has the potential to negatively impact American competitiveness and national security. The company recognizes that rules are needed and has asked for rules to be developed. The decision to move forward with the legal challenge is an attempt to compel basic rulemaking, which shouldn’t have come this far. Coinbase is committed to seeing this challenge through to its conclusion as it believes it has an obligation to its industry, customers, shareholders, and employees to seek regulatory clarity in the US.