Coinbase, the US-based cryptocurrency exchange, has filed a legal petition with the U.S. Court of Appeals for the Third Circuit, requesting that the U.S. Securities and Exchange Commission (SEC) respond to a petition that Coinbase submitted in July 2022.
In the initial petition, Coinbase asked the SEC whether it would consider allowing the crypto industry to be regulated using existing SEC frameworks. However, the SEC never responded to the petition, prompting Coinbase to file a new one.
In a blog post, Coinbase’s Chief Legal Officer, Paul Grewal, said that the company had taken legal action because it believed the SEC had already made up its mind to deny Coinbase’s petition, “but they haven’t told the public yet.” Grewal also noted that more than 1,700 entities and individuals have submitted comments to Coinbase’s petition, echoing the request for clarity.
The SEC has been ramping up enforcement actions and warnings against cryptocurrency firms in recent months, including Bittrex, Gemini, Genesis, Justin Sun, and Do Kwon. Last month, the SEC threatened to sue Coinbase over some of its products. Coinbase is known for its compliance with the law, but it has been hampered in developing and launching new products because of legal uncertainties, while its rivals have scaled up in international markets.
Coinbase co-founder and CEO, Brian Armstrong, has warned that the exchange may consider moving its headquarters outside the US unless the country changes its approach to regulation. Grewal noted that Coinbase does not take any litigation lightly, especially when it involves one of its regulators.
He added that regulatory clarity is overdue for the industry, and yet Coinbase and other crypto companies are facing potential regulatory enforcement actions from the SEC without being told how the SEC believes the law applies to their business.
In a blog post on Monday, Coinbase’s Chief Legal Officer Paul Grewal wrote, “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.” Grewal went on to assert that from the SEC’s public statements and enforcement activity in the crypto industry, it appears that the regulator has already made up its mind to deny Coinbase’s petition, “but they haven’t told the public yet.“
Brian Armstrong, the co-founder, and CEO of Coinbase, has also previously expressed concerns over the regulatory environment for cryptocurrencies in the United States. He has said that the exchange may consider moving its headquarters outside the US unless the country changes its approach to regulation. “Anything is on the table including, you know, relocating or whatever is necessary,” he said last week.
“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.
The cryptocurrency industry has long struggled with regulatory uncertainty, and Coinbase’s latest move shows that the exchange is willing to take on the SEC to push for more clarity and regulatory guidance. The outcome of the petition remains to be seen, but it is clear that tensions between Coinbase and the SEC are escalating, and the industry as a whole is calling for more regulatory clarity.
