Coinbase Tells Appeals Court It Seeks Regulatory Clarity From SEC

Coinbase Global addressed a federal appeals court Monday (Sept. 23), aiming to force the Securities and Exchange Commission (SEC) to create new rules for digital assets.

The cryptocurrency exchange sued the SEC last year after the regulator denied its petition for a new rulemaking, seeking to compel it to do so, Reuters reported Monday.

Coinbase Global wanted the SEC to provide clarity on when a digital asset is a security and to create a market structure framework compatible with cryptocurrencies, while the SEC said current regulations can cover the crypto sector, according to the report.

During the Monday hearing, a lawyer for Coinbase told the court that the SEC has made it impossible for the firm to operate in compliance with U.S. regulations, the report said.

A lawyer for the SEC said the existing regulations are sufficient and the agency is not required to create new rules, per the report.

The three judges hearing the arguments said Monday that the SEC can set its own priorities in terms of rulemaking but asked the regulator why cryptocurrency was not among those priorities, according to the report.

In a thread posted Monday on X, Coinbase Chief Legal Officer Paul Grewal wrote that the SEC has refused to provide regulatory guidance while also engaging in an “arbitrary” enforcement campaign.

“Regulation by enforcement does nothing but damage American consumers, innovation, US competitiveness, and our national security,” Grewal wrote in the thread. “Coinbase is determined to leave no stone unturned in our efforts to get clarity for our industry and the millions of Americans who hold crypto.”

When the SEC announced in December 2023 that it had decided in a 3-2 vote to deny Coinbase’s petition for new rules in the digital assets sector, SEC Chair Gary Gensler said he supported the decision for three reasons.

“First, existing laws and regulations apply to the crypto securities markets,” Gensler said at the time in a statement. “Second, the SEC addresses the crypto securities markets through rulemaking as well. Third, it is important to maintain Commission discretion in setting its own rulemaking priorities.”