According to Coinbase, the SEC is “talking out of both sides of its mouth” and its arguments against the petition for a writ of mandamus are wrong. Paul Grewal, the chief legal officer of the crypto exchange, stated that this mandamus is an appropriate remedy for the extraordinary circumstances.
The conflict between Coinbase and the market regulator is at the core of this dispute. Coinbase filed a lawsuit against the SEC last month, alleging that it failed to respond when the company requested a formal notice-and-comment process so that the public could weigh in. The SEC dismissed Coinbase’s claims as “baseless”.
Coinbase vs. SEC
In a 23-page submission to the Third Circuit of the United States Court of Appeals, Coinbase argued that the SEC’s extensive enforcement campaign on the same topic presented in Coinbase’s rulemaking petition renders the agency’s delay “unreasonable.”
Coinbase claimed that mandamus is the appropriate remedy and blamed the SEC for “making up its mind” to deny the petition. It also claimed that the SEC’s enforcement actions confirm that it is not considering Coinbase’s petition.
The submission also mentioned that the SEC has initiated more than 25 enforcement actions related to digital assets since the petition was filed in July 2022.
“These actions presuppose that the agency believes the securities laws are clear and workable as applied to digital assets and that additional rulemaking is unnecessary. And many of these enforcement actions require the Commission to take positions on the central questions in Coinbase’s rulemaking petition, such as the standard for identifying whether a digital asset is a security.”
Coinbase also pushed back against the SEC, stating that the agency’s argument that regulated entities should wait to be sued overlooks its duty to establish significant new legal standards through rulemaking and not enforcement.
SEC’s Initial Response
After numerous fruitless attempts to obtain a response from the SEC about its position on proposing and implementing rules to regulate securities that are offered and traded through digital means, a US court ordered the commission to respond to Coinbase’s complaint within ten days.
The Commission contended that it had no obligation to create new regulations and that Coinbase lacked standing to sue the agency. It also claimed that the digital asset sector already has regulations and rules governing it.