File summary Coinbase criticizes SEC for unclear regulations

Coinbase has made a bold move in its ongoing fight with the SEC, filing its closing statement in the Third District Court. This key legal battle hinges on a single, dismissive sentence in the SEC’s order that merely “disagrees” with Coinbase’s claim that current regulations are impractical for cryptocurrency companies. But Coinbase persists.

Here’s the story.

Understanding the basic problem

Coinbase argues that this lack of justification and detail is enough to dismiss the entire case. The SEC has a habit of overstepping its bounds, invoking broad jurisdiction without explicit congressional approval and refusing to set clear rules.

Paul Grewal, Coinbase’s chief legal officer, criticized the SEC’s accusations and actions as senseless. In its filing, Coinbase describes a Catch-22 scenario: The SEC demands compliance based on an overly broad interpretation of its authority, aggressively pursues lawsuits against crypto companies that fail to comply, and then refuses to establish rules that would enable compliance.

The allegations are still circulating

Coinbase says the SEC’s actions appear to be a deliberate attempt to dismantle the entire cryptocurrency industry by imposing unattainable demands and punishing companies that cannot meet them.

The letter further accuses the SEC of using inconsistent and unsupported legal arguments to maintain its campaign against the industry.

The need for court-ordered lawmaking

Coinbase’s filing states that absent a court order enjoining rulemaking, the SEC will continue its arbitrary and oppressive actions. Despite repeated industry requests for clear regulation, the SEC has refused to provide the necessary rules, making compliance with federal regulations impossible.

Coinbase insists the court’s directive is necessary to stop the SEC’s arbitrary actions. The company filed a petition seeking the rule nearly two years ago, but the SEC tried to sideline it through inaction. A mandamus petition, injunctions, and the threat of an emergency injunction were enough to compel the SEC to issue even a cursory denial order.

Will the SEC finally be forced to play by the rules? The future of cryptocurrencies depends on this key legal battle.