SEC Wants Court To Dismiss Coinbase Demand for Rules Explanation

The U.S. Securities and Exchange Commission (SEC) has recently asked the judge to deny Coinbase’s request to compel the agency to respond to a rulemaking petition which Coinbase submitted last year seeking clarity on how securities laws apply to cryptocurrency.

Last month, Coinbase sued the SEC claiming that the agency hasn’t been prompt or reasonable in providing a response. Furthermore, the exchange is seeking a formal notice-and-comment process that would allow the public to weigh in.

In its court filing on Monday, May 15, the SEC called Coinbase’s allegations “baseless”. In its filing, the Commission’s lawyers wrote:

“Coinbase’s preference for faster or different regulatory action by the commission does not entitle it to extraordinary relief from this court. The petition should be denied.”

SEC chief Gary Gensler has been repeatedly stating that most of the digital assets in the market are securities as per the existing rules. However, crypto players have responded by stating that the SEC should not use the same rulebook in dealing with digital assets, as it uses for traditional assets.

Coinbase Responds to SEC’s Request

Responding to the SEC on Monday’s filing, Coinbase chief legal officer Paul Grewal stated that it may be the first time that the securities regulator has formally explained its views in the court on whether it should create rules in the crypto industry.

Today the SEC responded to Coinbase’s petition for a writ of mandamus — asking the court to require the SEC to respond just yes or no to whether it will undertake rulemaking for our industry. The SEC’s answer? A resounding maybe. 1/7

— paulgrewal.eth (@iampaulgrewal) May 16, 2023

In its filing, the SEC has urged that regulatory changes will take time to consider. The agency called it “necessarily complicated endeavor,” while adding that there is no deadline by which it must complete its work. The SEC added that Coinbase hasn’t been harmed since the agency hasn’t acted on its petition.

But the SEC noted that it can act on the petition and has the right to enforce existing legal requirements while also considering some amendments.

As per the filing, the rulemaking petition “asks the commission to take a series of discretionary actions to replace existing applicable securities laws and regulations with a comprehensive new regulatory regime for the trading of crypto assets that are securities”.

The SEC has initiated several stringent actions against crypto firms in recent times going after some of the top industry players such as Coinbase, Kraken, Binance, and others.