all about cryptop referances
April 25 (Reuters) – (The opinions expressed here are those of the author, a columnist for Reuters.)
Is nine months an unreasonably long time to wait for regulatory measures?
Coinbase Inc (COIN.O) claims it is, in a new filing that marks the cryptocurrency exchange’s latest attempt to force the U.S. Securities and Exchange Commission to provide the industry with a clear set of rules and regulations instead of controlling crypto through enforcement. actions.
Coinbase, which revealed last month that it is in the crosshairs of the SEC, is asking the 3rd US Circuit Court of Appeals to order the SEC to respond to its July 2022 petition asking the agency to “propose and adopt rules to govern the regulation of securities offered and traded via digitally native methods.”
Suing to compel a federal agency to speed up rulemaking is quite unusual, as Coinbase general counsel Paul Grewal acknowledged in a blog post about the mandamus petition, which was filed Monday night.
It is even more unusual, based on the precedent cited by Coinbase counsel from Gibson, Dunn & Crutcher in the mandamus petition, to ask an appeals court to intervene just nine months after a formal request for agency action. In the rare cases where regulated businesses have prevailed on appellate requests to order federal agencies to respond to their rulemaking petitions, the allegedly unreasonable delay has been a matter of years, not months.
But Coinbase told the 3rd Circuit that time is relative. What matters, it argued, is not just the length of the delay, but the reasons behind it.
Here, the exchange argued, it is clear that the SEC does not intend to embark on the formal rulemaking process that Coinbase requested in its petition last July. SEC Chairman Gary Gensler said as much to Congress earlier this month, when he told lawmakers he expects crypto companies to “come in and register” with the SEC under its long-standing securities regulatory framework, Coinbase claimed.
Furthermore, the company argued, the SEC’s intensified enforcement campaign – including a potential case against Coinbase – shows that regulators intend to continue with their years-long strategy of setting crypto policy through litigation rather than regulation.
In that context, Coinbase said, it is unreasonable for the SEC to have delayed telling the company that its rulemaking petition is a non-starter.
“That kind of pocket veto is impermissible, and it’s precisely the kind of maneuver that mandamus exists to prevent,” wrote Coinbase attorney Eugene Scalia of Gibson Dunn on the record, who told the 3rd Circuit that Coinbase needs a formal ruling from the SEC in order to challenge its policy in an administrative law lawsuit. The SEC, he said, is “leaping” to delay judicial scrutiny of its policy choices. According to Coinbase, that is “inherently unreasonable.”
A spokesperson for the SEC declined to comment. A Coinbase spokesperson also declined to comment beyond the mandamus filing.
I don’t know if the 3rd Circuit will buy Coinbase’s argument that nine months is long enough to wait for a formal decision that is a foregone conclusion. The exchange, as I mentioned, has already disclosed that it received a so-called Wells notice from the SEC, which is actually a warning that regulators are ready to file an enforcement action. In his blog post about the new mandamus petition, Grewal said that the SEC’s potential suit against Coinbase (and other crypto companies) is one of the reasons why Coinbase is so determined to force the SEC to admit that it does not intend to engage in the regulations. process Coinbase has requested.
“Until the crypto industry gets that clarity, we will continue to take every step available to us to seek it, which includes today’s filing,” Grewal wrote.
Many pages of Coinbase’s filing are dedicated to the crypto industry’s frustration with regulators. Coinbase pointed out that it worked closely with the SEC to address the agency’s questions before the company went public in 2021. At the time, Coinbase said, the SEC’s position appeared to be that crypto exchanges did not fit neatly into any regulatory framework, whether the SEC’s authority to regulate securities or the US Commodity Futures Trading Commission’s authority over derivatives markets.
But since then, Coinbase said, the SEC has apparently decided it can simply exercise its power under existing securities laws to go after crypto businesses, including Coinbase. Coinbase told the 3rd Circuit that the industry is now stuck in a seemingly inescapable bind: The SEC has offered crypto companies no discernible path to register digital assets as securities, leaving the entire industry vulnerable to regulatory action for trading in unregistered securities.
Frustration quite oozes from the mandamus petition. Coinbase is a relative newcomer when it comes to the crypto industry’s protests against the SEC’s alleged policy of regulation-by-enforcement. They go back more than three years. But crypto companies, including Coinbase, have become increasingly agitated as SEC enforcement actions have proliferated.
For example, Coinbase cited its April 3 amicus brief in the SEC’s case accusing a former Coinbase employee of insider trading in cryptocurrencies. The crypto exchange filed its own brief, arguing that the case must be dismissed because the SEC has left the entire industry guessing about which digital assets it considers to be securities. But its arguments trail those of other crypto advocates — including the Blockchain Association, the Chamber of Digital Commerce, the Investor Choice Advocates Network and crypto investment firm Paradigm Operations LP — who have been calling for the SEC to issue specific regulations for years. framework for digital assets.
Coinbase told the 3rd Circuit in the new mandamus filing that its executives have met more than 30 times in the past year with SEC officials in an effort to find a path for digital assets to be registered by the agency. But it now appears to have concluded that more talks will not persuade the SEC to start a rulemaking process.
Mandamus petitions are generally measures of desperation. Coinbase must think it is now in desperate times.
Read more:
Coinbase files a legal challenge to push the SEC to write rules about crypto
Sorry crypto world, but the SEC isn’t backing down on ‘regulation by enforcement’
Reporting by Alison Frankel; editing by Leigh Jones
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The opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed under its fiduciary principles to integrity, independence and freedom from bias.
