Crypto exchange Coinbase Global Inc. COIN is set to challenge the U.S. Securities and Exchange Commission (SEC) in court following the regulatory body's refusal to establish new rules for cryptocurrencies.
The Securities and Exchange Commission (SEC), led by Chair Gary Gensler, announced its decision to reject a rulemaking petition submitted by Coinbase.
The SEC's denial, which came after 18 months of silence, was met with a legal response from Coinbase.
The company initially sought a judicial intervention to obtain a response from the SEC, a move acknowledged by the Third Circuit.
Coinbase's Chief Legal Officer Paul Grewal announced today that the company will further challenge the SEC's decision in court, criticizing the agency for not fulfilling its regulatory duties.
Grewal expressed frustration over the lack of clarity in the existing laws governing the crypto industry.
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He argued the current legal framework is ambiguous and more work is needed to establish clear regulations.
This sentiment was echoed by two SEC commissioners who disagreed with the denial, advocating for a collaborative approach to develop laws and rules that would benefit both consumers and U.S. innovation.
The contention over regulatory authority in the crypto space was further complicated by conflicting statements from high-ranking officials.
In congressional testimony after Coinbase's listing in 2021, the SEC chair declared the absence of regulatory authorities applicable to cryptocurrency exchange. This week, the chair of the Commodity Futures Trading Commission (CFTC) stated many tokens under existing law are considered commodities.
In the decision, Gensler underlined three primary reasons for the rejection:
- Current securities laws are fully applicable to crypto securities markets. There is no reason, he says, to believe that the protections offered by these laws are any less relevant for investors and issuers in the crypto space.
- The SEC takes a proactive approach in addressing the crypto securities markets through rulemaking. This includes various ongoing initiatives and proposed rules that are particularly pertinent to crypto asset securities and intermediaries. The Special Purpose Broker-Dealers Release provides specific operational conditions for broker-dealers in crypto asset securities.
- The decision reflects the SEC's priority to maintain discretion in setting its rulemaking agenda. The commission allocates its resources, entrusted by Congress, to address different sectors of the capital markets, including the crypto market.
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