In a recent revelation, Coinbase, which is the largest crypto company in the US, has decided to take action against the regulator. Reportedly, the firm is launching legal action against the United States Securities and Exchange Commission (SEC).
On Monday, Paul Grewal, Chief Legal Officer of Coinbase said the company has filed a “narrow action” in federal court against the SEC. The move intends to compel the regulator to respond with a yes or no to Coinbase’s pending rulemaking petition. The petition was filed in July last year asking the regulator to provide the required regulatory clarity for the crypto industry.
After the SEC sent a Wells Notice to Coinbase in March, the firm has often hinted towards being prepared for legal action if necessary. Moreover, the firm called out the regulator for being incompetent and biased, outlining the fact that it was the one who had previously requested the regulator for clarity in regulation and ways for the firm to adhere to the regulations better.
Grewal said that federal laws mandate the SEC to respond to petitions “within a reasonable time.” Largely, he echoed the sentiment of the entire crypto industry and its users. He said that there is a need for clear laws and rules to follow that are built for new technology. He added:
It’s obvious that there’s a lack of clarity among our regulators regarding crypto, as even the chair of the SEC has declined to say which crypto assets are securities. Enforcement actions based on inapplicable securities law aren’t the answer.
The firm has also alleged that their petition has been entirely ignored while Gary Gensler, the SEC chief, and his team have increased their enforcement actions against crypto companies. Recently, the SEC has been on an enforcement spree against the crypto companies and has even targeted big-shot names.
Reportedly, to date, more than 1,700 entities and individuals have submitted comments to the Coinbase petition echoing the request for clarity as stated in the official blog post.
Sources reveal that if the SEC refutes the rulemaking petition, Coinbase would be allowed to challenge that decision in court. However, it appears that the agency has already made up its mind judging by its war on crypto this year. Grewal said it was an unusual step because it is not normally required but the current situations have created the need for it. He added:
But it is also unusual for an agency to bring enforcement actions based on a view of the law that it has not yet shared formally with the public.
Coinbase is one of the many crypto companies that have been targeted by federal regulators, particularly the SEC, this year. Last week, CEO Brian Armstrong also spoke on the topic affirming readiness for legal action and hinting at a potential offshore move.
Before Coinbase, the regulator had fined Kraken and sent another Wells Notice to Paxos targeting BUSD, the third-largest stablecoin. The SEC accused Paxos of selling unregistered security but the firm categorically disagreed with the regulator.
Several lawmakers had already flagged concerns regarding the regulator’s behavior. French Hill, a Republican lawmaker, had said that the regulators and their crackdown on crypto entities will be responsible for driving innovation away.
Not just that, the lack of clarity in crypto regulation has been brought to the lawmaker’s table in a lot of instances. As the two prime regulators i.e. the SEC and the Commodities Futures Trading Commission (CFTC) have been in constant strife, the CFTC heads requested lawmakers to intervene in the process to make it easier.