In the ongoing regulatory battle between the United States Securities and Exchange Commission (SEC) and Coinbase, the firm has retaliated to the regulator’s latest notice. The recent move is in response to SEC’s refusal to provide clarity on crypto regulations following the petition.
On Tuesday, Paul Grewal, Coinbase’s Chief Legal Officer (CLO), said that Coinbase sent out an official reply to the SEC’s arguments against its petition for a writ of mandamus. Mandamus is a writ issued by a court requiring a public official or entity to perform a duty associated with that office, in this case, the SEC. He added:
Mandamus is the tailor-made remedy for the extraordinary facts presented here. We continue to appreciate the Court’s consideration.
In its latest court filing, targeting the regulator, Coinbase suggested that regulation via enforcement was the root of the problem, not the solution. It added:
The SEC’s delay in deciding whether to conduct a rulemaking is indefensible given its decision to pursue an aggressive, accelerating enforcement campaign regarding the very topics identified in Coinbase’s petition. The SEC’s threatened enforcement action against Coinbase dispels any doubt.
Further, the filing stated that the regulator had received about five petitions regarding rulemaking clarity since 2017 but has failed to act on any of them. Hence, the Coinbase counsel asked the court to issue a writ of mandamus instructing the SEC to respond to the rulemaking petition within seven days.
Additionally, it wanted an explanation for the delay. However, as per sources, this is likely to have the same fate as others with SEC reiterating its previous stance that rules for securities trading are clear.
The SEC sent a Wells Notice to Coinbase for violating federal securities laws and selling unregistered security. The Wells notice means that the SEC has made a preliminary determination that will see it recommend an enforcement action against Coinbase. Following that, the firm expressed disappointment and later retaliated with a narrow legal action to seek clarity.
Coinbase referred to its petition from July 2022 asking the SEC to provide overdue guidance for the crypto industry which has since been ignored. In April, the firm filed a rulemaking petition against the SEC seeking an immediate determination to take a series of discretionary actions to replace existing applicable securities laws and regulations with a comprehensive new regulatory regime for the trading of crypto assets that are securities.
In response to the complaint, the US Court of Appeals for the Third Circuit sent a notice to the SEC regarding the need for clear rules for trading digital assets. However, even after all this, the SEC stayed firm on its stance and disregarded the need for regulations. Denying Coinbase’s demand, the SEC said it had no right to request regulatory clarity and that securities rules already exist.