In the ongoing case between the United States Securities and Exchange Commission (SEC) and Coinbase, the regulator has updated the exchange’s request for clarity on crypto regulations. The SEC has asked for four months to respond to the clarity on the regulation that the exchange is seeking.
According to a letter dated June 13th addressed to the U.S. Court of Appeals for the Third Circuit, the SEC needs an additional 120 days to reply to Coinbase’s request that it adopt new rules and provide further clarity on the laws governing crypto. The regulator’s recent response comes following the June 6th letter from the court which asked the SEC to be explicit in addressing if it’s denying the rulemaking or if it needs more time to respond.
In the response, the SEC said it “has not decided what action to take on that petition in whole or in part” and claimed Coinbase’s request for a writ of mandamus has “no merit.” The securities regulator claimed that the mandamus petition “should be denied” but anticipated it would be able to make a recommendation on Coinbase’s petition for rulemaking “within the next 120 days.”
Taking a shot at the SEC, Paul Grewal, Coinbase chief legal officer (CLO), took to Twitter to share the news of the SEC’s response to the US court. In his tweet, Grewal stated that the SEC had repeated the “fallacy” that it was yet to decide on any new regulation.
Further, he outlined that the SEC and its chief displayed different stances. He said that what was stated in the letter was entirely different from the statements made by Gary Gensler, SEC chief, wherein he stated that the SEC has “no intent to issue new rules.” He added:
[The SEC] instead conflate the evidence of a decision those statements provide with an argument that the statements are themselves a decision. They refuse to commit to any deadline despite the Court’s explicit order.
Notably, the court’s order to the SEC came the same day the regulator filed charges on Coinbase for offering unregistered securities and operating an unregistered securities exchange. The lawsuit came months after the Wells Notice the SEC sent to Coinbase in March.
Upon receiving the notice, the exchange often called out the securities regulator for being antagonistic to crypto entities and implementing an enforcement-oriented approach. Following that, the firm retaliated with a narrow legal action to seek clarity and 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.
To which, the exchange filed a petition in the US court criticizing the SEC and highlighting its approach as the root of all the problems. Notably, the SEC’s transition from clear denial to seeking more time is a remarkable change and adds a positive for the industry. However, as Coinbase fights its legal battles with the SEC, certain lawmakers including Senator Cynthia Lummis has also stood up for requirement of a clear and comprehensive regulation for the crypto industry.