Coinbase Takes on SEC, Criticizes Commission’s Response as ‘Evasive’

The situation intensifies as Coinbase, a crypto exchange, strives to establish clarity in the regulatory landscape of the United States. After receiving a noncommittal and unsatisfactory response from the Securities and Exchange Commission (SEC), the US-based crypto company has filed another official petition with a federal court on Saturday.

This latest action adds to the ongoing legal battle between Coinbase and the SEC, initiated when the cryptocurrency exchange was sued by the US financial watchdog earlier this month.

Coinbase Files Mandamus Petition Against ‘Evasive’ SEC

On June 6, 2023, the SEC charged Coinbase, alleging that the crypto company operates as an unregistered securities exchange and broker. The lawsuit claims that Coinbase violated existing securities law through its staking-as-a-service program. However, a judge instructed the federal agency to respond to Coinbase’s initial petition for a clear regulatory framework.

In the previous year, Coinbase submitted a rulemaking petition to the SEC, seeking clarification on standards for determining whether a digital asset qualifies as a security and the possible registration process for the crypto industry.

On June 13, the financial regulator finally responded with a letter stating that it has not yet decided on the course of action regarding the petition. The SEC also mentioned that it expects an internal recommendation from its staff within 120 days.

In a June 16 letter to the Third Circuit, Coinbase reiterated its pursuit of a definitive regulatory framework and claimed that the SEC appears to be deliberately avoiding it. The company’s first argument in the letter requests the court to grant mandamus, a judicial writ that commands a government agency to perform a specific duty. In this case, Coinbase seeks an order from a federal judge to establish clear rules and regulations for the crypto industry.

‘The Rules and Regulations Are Already Clear’

Coinbase further argued that the commission’s refusal to disclose the additional time it needs to act on the rulemaking petition confirms that any further delay would be futile. The US-based crypto exchange believes that the agency will not take action unless compelled by a writ.

Coinbase asserts that the SEC’s indifference towards the petition is deliberate, especially since the commission’s chair, Gary Gensler, recently stated that there will be no rulemaking as the rules and regulations are already clear and have been for years.

If the mandamus request is not decided upon, Coinbase requests the court to order the SEC to report its actions within 60 days. If the agency still fails to act within the stipulated period, Coinbase urges the court to promptly rule on the mandamus petition.

Despite facing regulatory challenges, the crypto industry continues to demonstrate resilience, currently boasting a market capitalization of $1.037 trillion.

Total Crypto Market Cap at $1.037 trillion | Source: CryptoTotalMarketCap chart from TradingView