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Coinbase has leveled accusations against the U.S. Securities and Exchange Commission (SEC), alleging disregard for the law in rejecting the company's formal petition for crypto regulations.
The claims were made in a filing submitted Monday to the U.S. Court of Appeals for the Third Circuit.
Arbitrary Action by SEC
Legal representatives for Coinbase contend that the securities regulator has exhibited arbitrary and capricious behavior by asserting authority over crypto assets while refraining from formulating new regulations governing their treatment. Instead, the agency has predominantly relied on enforcement actions to oversee digital assets, as the company argued in the opening brief of its lawsuit.
Coinbase's legal team further asserts that when the SEC dismissed the Coinbase petition in December, it provided minimal explanation for its refusal to craft crypto-specific regulations. In response to the rejection of the Coinbase petition, SEC Chair Gary Gensler emphasized the agency's ongoing efforts to develop crypto rules, albeit not necessarily aligning with industry expectations. Gensler stressed the importance of retaining commission discretion in establishing rulemaking priorities.
Seeking Clarity and Accountability
Coinbase's Chief Legal Officer, Paul Grewal, underscored the need for the SEC to elucidate its actions and allow the public to weigh in on its use of regulatory powers.
According to Coin Desk, Grewal emphasized the lack of substantive reasoning in the SEC's cursory denial, stating that the company's lawsuit aims to compel a comprehensive explanation from the regulatory body.
The SEC has been embroiled in numerous legal battles about crypto matters, varying outcomes across cases. While the regulator suffered significant setbacks in disputes with Ripple and Grayscale, resulting in the approval of spot bitcoin exchange-traded funds, it has also emerged victorious in other instances, including a recent ruling in an insider-trading case involving a former Coinbase employee.
Based on a Finance Magnates report, the SEC faced significant legal setbacks in its pursuits against Ripple and Grayscale, with the courts ruling in favor of the crypto companies.
Nevertheless, the agency secured victories in other legal actions against various crypto firms. Additionally, Coinbase is defending itself against allegations brought forth by the SEC, accusing the platform of operating as an unregistered securities exchange, broker, and clearing agency.
The industry closely monitors these legal proceedings, with potential appeals and reversals anticipated as disputes progress toward potential consideration by the U.S. Supreme Court.
Photo: Louis Velazquez/Unsplash
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