In a final push for rulemaking, Coinbase has argued that an appeals court should order the U.S. Securities and Exchange Commission (SEC) to start writing rules for crypto. The cryptocurrency exchange stated that crypto firms are caught in a “Catch-22” situation, where the SEC demands compliance while also launching litigation against firms for their failure to comply, all while refusing to provide clear rules.
In a 36-page closing brief filed on Friday in the Court of Appeals for the Third Circuit, Coinbase accused the SEC of trying to destroy the industry by setting impossible standards and prosecuting companies that fail to meet them. The exchange claimed that the agency’s refusal to provide clear rules is a deliberate effort to effect a major policy change.
The ongoing dispute between Coinbase and the SEC dates back several years, with Coinbase first requesting formal rulemaking in July 2022. While the SEC has not introduced specific regulations for crypto, it has proposed rules that apply to the industry. Coinbase argued that the SEC’s existing rules are inadequate and do not fit the unique characteristics of the crypto market.
The SEC has also taken enforcement actions against crypto platforms and projects, including suing Coinbase for operating its platform without registering. The agency’s Chair, Gary Gensler, has maintained that most cryptocurrencies are securities and should be regulated as such. Coinbase attempted to force the SEC to respond to its rulemaking petition by suing the agency in April 2023, but the SEC denied the request for new rules, stating that existing regulations already apply to crypto.
The SEC declined to comment on Coinbase’s latest push for rulemaking. The ongoing battle between the exchange and the regulatory agency highlights the challenges faced by the crypto industry in navigating uncertain regulatory terrain.