Coinbase Locks Horns with US SEC in Court Over Crypto Rulemaking

Coinbase
and
the
US
securities
regulator
faced
off
in
a
federal
appeals
court
in
Philadelphia
on
Monday
as
the
cryptocurrency
exchange
pressed
the
agency
to
create
new
rules
for
digital
assets.

Coinbase,
the
largest
US
crypto
exchange,
sued
the
Securities
and
Exchange
Commission
last
year
in
an
effort
to
compel
the
regulator
to
act
on
a
petition
for
rulemaking
Coinbase
filed
in
2022.

In
that
petition,
it
urged
the

SEC to
provide
clarity
on
circumstances
under
which
a
digital
asset
is
a
security
and
create
a
new
market
structure
framework
compatible
with
cryptocurrencies.

The
SEC
denied
Coinbase’s
petition
for
new
rulemaking
in
December
2023,
saying
it
fundamentally
disagreed
that
current
regulations
are
“unworkable”
for
the
crypto
sector.

Coinbase
on
Monday
asked
a
federal
appeals
court
to
overturn
that
denial,
saying
the
SEC
has
made
it
impossible
for
the
crypto
firm
to
operate
and
comply
with
US
regulations.

Eugene
Scalia,
a
lawyer
for
Coinbase,
told
the
three-judge
appeals
court
the
SEC
had
been
arbitrary
and
capricious
in
not
giving
Coinbase
more
answers
on
how
to
register
with
the
agency
and
comply
with
US
laws.

A
lawyer
for
the
SEC
argued
that
the
agency
is
not
required
to
create
a
new
rule
for
the
sector,
and
that
existing
regulations
should
suffice.

“If
Coinbase
wants
to
arrange
its
business
in
a
way
that
does
not
comply
with
the
existing
regulatory
framework,
that
does
not
establish
a
right
to
have
the
framework
adapted
to
meet
their
business,”
SEC
lawyer
Ezekiel
Hill
said.

The
three
appeals
court
judges
heard
arguments
from
both
sides,
noting
the
SEC
does
have
discretion
in
rulemaking
priorities
but
also
pressing
the
regulator
on
why
cryptocurrency
was
not
one
of
them.

The
dispute
is
the
latest
in
a
broader
tug-of-war
between
the
crypto
sector
and
the
top
U.S.
markets
regulator,
which
has
repeatedly
said
most

crypto
tokens
are
securities
and
subject
to
its
jurisdiction.
The
agency
has
sued
several
crypto
companies,
including
Coinbase,
for
listing
and
trading
crypto
tokens
which
it
says
should
be
registered
as
securities.

Coinbase
denies
those
allegations
and
is
fighting
them
in
a
separate
court
case.

The
crypto
industry
largely
believes
it
operates
in
a
regulatory
gray
area
not
governed
by
existing
US
securities
laws,
and
that
new
legislation
is
needed
to
regulate
the
sector.