Coinbase’s recent plea from the U.S. Court of Appeals for the Third Circuit for clear crypto regulation was heard loud and clear. Last May 15, the United States Securities and Exchange Commission (SEC) argued in court that it is under no obligation to meet the requirements of Coinbase’s petition and that it could take years for the rule-making. The SEC also asked for the court to deny Coinbase’s plea, calling it an “extraordinary remedy” and that Coinbase “does not and cannot demonstrate a right” to relief.
Uncertainties Remain in Coinbase’s Legal Battle with SEC
Coinbase’s Chief Legal Officer, Paul Grewal, appears satisfied with the court’s formal response, but uncertainties remain. The Exchange giant initially posed 50 specific questions to the regulator about the regulatory treatment of certain digital assets. The SEC issued Coinbase a Wells notice, indicating potential legal action for alleged securities law violations.
Just hours prior to the SEC’s court filing, SEC Chair Gary Gensler gave a keynote speech at a financial conference. His views seemed contradictory to the agency’s stance that the crypto market requires comprehensive regulation. Gensler even mentioned that the crypto industry already had “rules of the road” in place.
A Reminder of SEC’s Evaded Pleas and Inquiries
Worryingly, even with the SEC’s response in court, the uncertainty surrounding crypto regulations in the US remains. The agency also distanced itself from any public comments or views of its chair in its recent filing. The agency’s response seems to focus more on comments about classifying most crypto assets as securities. This supports Coinbase’s request for a writ of mandamus to compel the agency’s response in the U.S. Court of Appeals for the Third Circuit — as the “tailor-made remedy” for the “extraordinary facts” presented by the court.
Moreover, the Coinbase case could be a permanent reminder of how the SEC has continuously evaded Coinbase’s pleas and inquiries over the years. The US investment bank Citigroup even recently downgraded Coinbase’s shares from “buy” to “neutral” due to the many “unknowns” of such an uncertain environment.
Ongoing Legal Battle Raises Questions About SEC’s Approach to Crypto Regulation
Will SEC Chair Gary Gensler truly have the final say on US crypto regulations? Only time will tell. The agency has seemingly been evasive in providing clarity over the years. This could be attributed to the nature of crypto regulation itself As Grewal himself noted, the lack of clarity on what the SEC may consider to be within or outside its jurisdiction at any time, as well as the agency’s consistent rule changes, all add to the existing uncertainty.
Coinbase and the SEC are engaged in a dance to avoid addressing the issue of crypto regulation. The court’s order for the SEC to respond within seven days adds weight to the ongoing legal battle. We’ll see if the SEC’s response indicates proactive crypto regulation or continued evasion of Coinbase’s request.
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