Coinbase files narrow action in federal court to compel SEC response on crypto industry guidance
Coinbase, a leading cryptocurrency exchange platform, has taken a formal step to seek regulatory clarity from the U.S. Securities and Exchange Commission (SEC) by filing a narrow action in federal court today. The action demands that the SEC respond to Coinbase’s July 2022 petition, which requested the regulatory body to use its formal rulemaking process to provide guidance for the crypto industry.
The rulemaking process allows agencies to develop regulations with public input and have their positions tested through judicial review. Coinbase’s petition has received support from over 1,700 entities and individuals, all asking for regulatory clarity.
The Administrative Procedure Act (APA) mandates the SEC to respond to Coinbase’s rulemaking petition within a reasonable time. If the SEC denies the petition, Coinbase can challenge the decision in court and argue the necessity of rulemaking. The SEC has not yet formally responded, prompting Coinbase’s court filing, which asks the court to compel the SEC to share its decision.
This legal action by Coinbase is unusual but necessary, as the SEC has brought enforcement actions against crypto companies without formally sharing its stance on the law. Coinbase is not asking the court to dictate the SEC’s response but rather to order the SEC to respond as required by law.
While litigation is not taken lightly by Coinbase, regulatory clarity is overdue for the crypto industry. Companies are facing potential enforcement actions from the SEC without clear guidelines on how the law applies to their operations. The rulemaking process is crucial for informing the public about permissible activities.
Coinbase remains committed to seeking regulatory clarity through all available avenues, including this legal action, while maintaining open dialogue with the SEC and other regulators. The company believes that cryptocurrency and blockchain technology can increase economic freedom and opportunity worldwide.
By seeking regulatory clarity, Coinbase aims to fulfill its obligations to the industry, customers, shareholders, and employees. The legal challenge filed today is part of a multi-year effort to request clear rules from Washington leaders. The company acknowledges the need for rules and has actively sought their development. This legal action aims to compel basic rulemaking and should have been unnecessary, but Coinbase is determined to see the process through to its conclusion.