Coinbase Sues Sec Over Rulemaking, Seeks Regulatory Clarity For Crypto
Coinbase said the rulemaking process exists so that agencies can develop regulation with the benefit of public input, and have their position tested through judicial review. The petition has received support from over 1,700 entities and individuals who have reiterated their call for regulatory clarity in the crypto industry.
Coinbase, the largest crypto exchange in the United States, has filed a lawsuit in federal court against the Securities and Exchange Commission (SEC), asking that the regulator publish its response to a petition filed in July 2022. The crypto exchange had then filed a petition asking The SEC will use its formal rulemaking process to provide guidance for the crypto industry. It has now requested a yes or no response to the request.
Coinbase said the rulemaking process exists so that agencies can develop regulation with the benefit of public input, and have their position tested through judicial review. The petition has received support from over 1,700 entities and individuals who have reiterated their call for regulatory clarity in the crypto industry.
Chief Legal Officer for Coinbase, Paul Grewal said in a blog post, “From the SEC’s public statements and enforcement activity in the crypto industry, it appears that the SEC has already decided to deny our petition. But they haven’t told the public yet. So the action Coinbase filed today simply asking the court to ask the SEC to split its decision.”
“This step may feel unusual, and it is, because this step is usually not necessary. But it is also unusual for an agency to come to enforcement based on a view of the law that it has not yet formally shared with the public.”
He said Coinbase is not asking the court to instruct the agency how to respond, but is “asking that the court order the SEC to respond at all, which they are legally obligated to do,” he added.
This comes after the SEC in March issued a Wells Notice to Coinbase warning the company could face civil lawsuits with respect to its spot market, wallet products, Coinbase Prime and Coinbase Earn.
In January, the exchange paid a $50 million fine for allegedly failing to maintain an effective transaction monitoring system to root out “suspicious” activity. The exchange had paid an additional $50 million to improve its compliance program under the direction of the New York Department of Financial Services.
Grewal said “Coinbase does not take any litigation lightly, especially when it relates to one of our regulators. Regulatory clarity is overdue for our industry. Still, Coinbase and other crypto companies face potential regulatory enforcement actions from the SEC, even though we have not . have been told how the SEC believes the law applies to our business.”
“The regulatory process is a critical step in letting the public know what activities they can and cannot engage in. So until the crypto industry gets this clarity, we will continue to take every step available to us to seek it, which includes today’s filing. We also remain available to the SEC and all of our regulators for dialogue at any time on these issues,” he added.
