Coinbase Sues Court to Force SEC to Develop Digital Asset Regulations

Brief description of the dive:

• Cryptocurrency exchange Coinbase has asked a federal appeals court to order the Securities and Exchange Commission to establish new rules governing digital assets.
• Coinbase lawyer Eugene Scalia told the justices on Monday that United States Court of Appeals for the 3rd Circuit, which The SEC did not explain why it rejected Coinbase’s request for regulations that would clearly define when digital assets are securities, Reuters reported thatThe company wants the court to overturn the agency’s refusal.
• The agency, which largely treats digital assets as securities, has taken legal action against several cryptocurrency companies. Scalia accused the agency of engaging in “extremely oppressive government behavior” by issuing enforcement orders against companies, not offering them the opportunity to register with the agency, Bloomberg reported.

Diving Insight:

Monday’s arguments are the latest in a dispute between the regulatory agency and the company. The Securities and Exchange Commission (SEC) has determined that most crypto tokens are securities and subject to its jurisdiction. Industry representatives, however, argue that existing securities laws do not apply to cryptocurrencies.

Coinbase filed a petition for regulation in 2022, seeking clarification on which crypto assets are securities and how they should be regulated.

The company then sued the SEC in April 2023 to compel the agency to respond to the petition. This The SEC rejected the company’s petition in December last year disagreeing that applying existing securities laws and regulations to crypto assets was “impracticable.”

Also in June 2023 SEC sues Coinbaseloading it with running an unregistered national stock exchange, broker and clearing agency, as well as for failing to register the offer and sale of the staking-as-a-service program. Judge he said in March that the case can be considered further.

Coinbase has long accused the SEC of regulation through law enforcement. According to Reuters, Scalia told the court on Monday that the SEC’s erratic approach has left the company unable to comply with rules and regulations.

Meanwhile, SEC attorney Ezekiel Hill told the court that a new rule for the cryptocurrency industry is not needed because current regulations are sufficient.

“If Coinbase wants to structure its business in a way that is not consistent with the applicable regulatory framework, that does not give it the right to adapt the framework to its business,” Hill said, according to the news agency.

In response, the justices acknowledged that the SEC does not have to justify its denials, but they also drew Hill’s attention to the agency’s position that details about crypto assets are not a priority, Axios reported. The judges did not issue a ruling immediately after Monday’s hearings.