Coinbase, a major cryptocurrency exchange, has taken legal action against the US Securities and Exchange Commission (SEC), demanding a response to its previous petition. The regulator has recently become stricter towards the crypto industry, suspecting that most firms breach securities laws without providing precise regulatory policies.
SEC Needs to Respond with a Yes or No Answer
On April 24, 2023, Coinbase filed a writ of mandamus against the SEC in the US Court of Appeals for the Third Circuit, requesting the agency to reply to the rulemaking petition it submitted in July 2022. In the petition, the crypto exchange asked the SEC to “propose and adopt rules to govern the regulation of securities that are offered and traded via digitally native methods, including potential rules to identify which digital assets are securities.”
Several months have passed, and the regulatory watchdog has yet to respond to Coinbase’s petition, prompting the latest lawsuit as it has unreasonably delayed its action.
As stated by Coinbase Chief Legal Officer Paul Grewal in a blog post, the SEC could deny the company’s rulemaking petition, considering the regulator’s recent enforcement action and statement. However, Coinbase is seeking public disclosure of the SEC’s decision.
Coinbase has received a Wells notice from the SEC, alleging that the firm may have violated securities laws. Although the crypto exchange asserts that it has not broken any law, it is willing to go to court against the regulator.
Meanwhile, Coinbase has expressed an intention to depart from the US if no robust regulatory policies are implemented. The company has recently been awarded a Bermuda license and is also eyeing the United Kingdom.
SEC’s Gensler Accuses Crypto Firms of Law-Breaking
Coinbase pointed out that SEC Chairman, Gary Gensler, has been taking enforcement actions against crypto companies instead of providing regulatory clarity. The crypto exchange’s CEO, Brian Armstrong, has recently criticized the agency, saying its war-like style has caused “untold harm” to the United States.
Gensler’s crackdown has also prompted US Representative Warren Davidson to introduce new legislation that aims to remove the SEC boss from his position. Davidson believes removing Gensler will correct a “long series of abuses.”
However, the SEC Chairman has stated that the Commission will not change its approach and emphasizes that cryptocurrency companies must abide by existing laws.