Coinbase recently filed a closing brief with the US Court of Appeals for the Third Circuit, challenging the SEC’s denial of its rulemaking petition. The crux of the issue lies in a single sentence in the SEC’s order, where the regulatory body “disagreed” with Coinbase’s assertion that current SEC rules are unworkable for digital asset firms. Coinbase argues that this lack of reasoned decision-making should lead to the regulator’s order being vacated. Additionally, Coinbase is urging the court to compel the SEC to engage in rulemaking specifically for the crypto industry.
Paul Grewal, Coinbase’s Chief Legal Officer, took to social media to emphasize the significance of this legal battle and criticize the SEC for providing no substantial reasoning behind its disagreement. Grewal highlighted the broader implications of the SEC’s stance, suggesting that the regulatory body is overstepping its jurisdiction without clear authorization from Congress and without establishing clear rules for the rapidly growing digital asset industry. He expressed concerns about the SEC’s approach, accusing the agency of attempting to stifle the digital asset industry without providing the necessary framework requested by industry participants.
Coinbase’s legal brief argues that the SEC’s failure to engage in proper rulemaking violates the Administrative Procedure Act (APA), which mandates agencies to participate in rulemaking for significant policy changes. The brief contends that the SEC’s policies on digital assets have been inconsistent and lack a coherent legal standard, making compliance virtually impossible for industry players. It points out that the SEC’s shifting positions over the years have created uncertainty and confusion within the industry.
The case has garnered substantial attention from the crypto community and regulatory observers, as the outcome could have wide-ranging implications for the regulation of digital assets in the United States. The legal battle between Coinbase and the SEC underscores the ongoing tension between the digital assets sector and regulatory bodies as the industry clamors for clarity and fair treatment under the law. The decision of the Third Circuit on this matter will be closely monitored, as it could significantly influence the future of digital asset regulation and delineate the extent of the SEC’s authority over the industry.
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