Crypto Exchange Coinbase Sues SEC Over Rulemaking Petition – Coinbase stated that it has submitted a petition to the U.S. Securities and Exchange Commission (SEC) to demand a response to an old petition. The previous petition inquired if the SEC would authorize the industry to be regulated utilizing its existing frameworks.
This move by Coinbase has further intensified the tension between the exchange firm and the SEC, which has increased its enforcement actions and cautions towards cryptocurrency firms, including Coinbase. In the July 2022 petition, Coinbase asked whether the SEC would “propose and adopt rules to govern the regulation of securities that are offered and traded via digitally native methods.”
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The SEC never responded to the petition. “The rulemaking process exists so that agencies can develop regulation with the benefit of public input, and have their position tested through judicial review.” “To date, more than 1,700 entities and individuals have submitted comments to Coinbase’s petition echoing the request for clarity,” Coinbase chief legal officer Paul Grewal wrote in a blog post.
According to Grewal, it seems that the SEC has already decided to reject Coinbase’s petition based on their public statements and enforcement actions in the crypto industry, but they have not made this decision known to the public yet. On Monday, Coinbase submitted a petition to the U.S. Court of Appeals for the Third Circuit, which is the latest form of resistance the SEC has encountered in recent months.
The SEC has been taking enforcement actions against various cryptocurrency firms such as Bittrex, Gemini, and Genesis, along with entrepreneurs like Justin Sun and Do Kwon. In the previous month, the SEC issued a warning to Coinbase regarding some of its products, which may lead to a potential lawsuit.
Despite being the leading example of compliance with laws among cryptocurrency exchanges, Coinbase has faced challenges in developing and launching new products due to legal uncertainties, causing the company to lag behind its competitors who have expanded into international markets. Brian Armstrong, the CEO and co-founder of Coinbase, recently mentioned that the exchange could contemplate relocating its headquarters outside the U.S. if the country does not modify its regulatory approach.
He stated that they are willing to consider all possible options, including relocation or other necessary steps. “Coinbase does not take any litigation lightly, especially when it relates to one of our regulators. Regulatory clarity is overdue for our industry. Yet Coinbase and other crypto companies are facing potential regulatory enforcement actions from the SEC, even though we have not been told how the SEC believes the law applies to our business,” Grewal wrote.