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On Monday, April 24, US’s largest crypto trading platform Coinbase (NASDAQ: COIN) recently filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) to compel the regulator to respond to a rulemaking petition filed by Coinbase last year.
In the lawsuit filed with the federal court in Philadelphia, Coinbase argued that the SEC hasn’t been prompt or reasonable in providing a response. Coinbase’s rulemaking petition submitted last year asks the SEC to write regulations explaining how securities laws are applicable to digital assets.
Besides, Coinbase also wants the SEC to engage in a formal notice-and-comment process, which would allow the public to weigh in. In an interview with Bloomberg, Coinbase’s Chief Legal Officer Paul Grewal said:
“Not only have we been waiting for many, many months, but there’s been a campaign of enforcement that the SEC has embarked upon in parallel”.
Apart from Coinbase, several crypto firms like Ripple and others have complained that the SEC hasn’t provided any clarity on crypto regulations.
Over the last few months, SEC chair Gary Gensler has been reiterating that most digital assets are securities. In a separate comment, the SEC chair also said that the existing rules are clear and the crypto firms just refuse to follow them.
Coinbase and SEC Rift Widens
The recent action from Coinbase is likely to widen its rift with the securities regulator going ahead. Last month, the crypto exchange followed up on its petition with a comment submitted to the agency seeking more regulatory clarity with SEC’s view on staking services. This service allows users to earn rewards in exchange for allowing their tokens to be used in transactions on the blockchain.
However, the crypto exchanges faced a Wells Notice from the securities regulator in return for this. The notice signals that the SEC plans to sue Coinbase over a range of alleged violations. Over the years, crypto exchange Coinbase has positioned itself as the most compliant crypto exchange. Besides, it has also shown intentions to work closely with the regulators.
Coinbase’s Grewal said that if the SEC believes crypto doesn’t need separate rules, it should respond to the petition accordingly. This would also give Coinbase the opportunity to challenge the assessment in court. He added:
“What the SEC chair is doing is depriving the third branch — the US courts — from a chance to exercise their authority to evaluate whether he got it right or he got it wrong”.
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