Coinbase sharply criticizes the SEC in its final statement for refusing to provide clear regulations

On May 31, Coinbase filed a final appeal with the U.S. Court of Appeals for the Third Circuit challenging the SEC’s dismissal of its rulemaking petition.

The case centers around one final sentence of the SEC’s order that “disagrees” with Coinbase’s contention that current SEC rules are unenforceable for digital asset companies.

The stock exchange argues that the lack of a well-thought-out decision should result in the regulator’s decision being repealed. Additionally, Coinbase wants the court to order the SEC to engage in rulemaking for the cryptocurrency industry.

Coinbase’s chief legal officer, Paul Grewal, emphasized the importance of this legal battle on social media and criticized the SEC for failing to substantiate its opposition. He said:

“The SEC order must be rescinded for this fundamental reason alone.”

Grewal emphasized the broader implications of the SEC’s position, arguing that the SEC is overstepping its authority without explicit congressional approval and without establishing clear rules for the burgeoning digital asset industry.

Refusal to provide rules

Grewal also raised concerns about the SEC’s approach, accusing the agency of trying to suppress the digital asset industry. He said:

“The SEC is determined to suppress the digital asset industry and refuses to provide the necessary rules the industry has asked for to tighten its stranglehold.”

This sentiment is echoed in Coinbase’s legal filing, which argues that the SEC’s actions are part of a deliberate effort to destroy the industry by enforcing compliance with unenforceable regulations.

Coinbase’s filing states that the SEC’s failure to engage in appropriate rulemaking violates the Administrative Procedure Act (APA), which requires the agency to engage in rulemaking in the event of major policy changes.

Coinbase argues that the SEC’s digital asset policies are inconsistent and lack consistent regulatory standards, making it impossible for industry participants to comply with them. In short we state:

“The SEC’s position has changed dramatically and continually, creating uncertainty and confusion.”

The filing also highlighted the agency’s conflicting statements over the years and its aggressive enforcement actions that, without clear guidance, only targeted a subset of digital assets.

The situation is unsustainable

Coinbase’s legal team argued that the SEC must engage in rulemaking to establish clear and enforceable standards for digital asset companies.

The document points out that the SEC’s current position effectively renders the entire digital asset industry non-compliant with applicable regulations, which is an “unsustainable and unfair” situation.

The case has attracted significant attention from the crypto community and regulatory observers as it could have far-reaching implications for the regulation of digital assets in the US.

The Coinbase challenge illustrates the ongoing tension between the digital asset industry and regulators as the industry strives for transparency and fair treatment under the law.

The Third Circuit’s decision in this case will be closely watched because it could shape the future of digital asset regulation and determine the scope of the SEC’s authority over the industry.

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