Coinbase intends to initiate legal action against the SEC, accusing the regulatory body of shirking its responsibilities, according to the exchange’s chief legal officer, Paul Grewal.
The move follows the SEC’s rejection of Coinbase’s petition for establishing specific regulatory rules for cryptocurrency transactions, a request that Coinbase had been pushing for since July 2022.
Abdication of duty
Grewal took to social media to voice his disapproval of the SEC’s decision, emphasizing the long period of inaction from the watchdog and the need for regulatory clarity in the cryptocurrency industry. His tweet highlighted Coinbase’s frustration with the regulator over what it perceives as the “abdication of its duty.”
The core of Coinbase’s argument is the ambiguity and complexity of the current legal framework surrounding cryptocurrencies. Grewal pointed out contradictions in the SEC’s stance over time, including statements made by the SEC Chair in Congressional testimony after Coinbase was permitted to list in 2021.
He also highlighted the fact that two SEC commissioners also disagree with the regulator’s stance toward the Coinbase petition.
Dissent within
The SEC’s rejection provided three reasons for the denial. First, it stated that the existing laws and regulations already apply to the crypto securities markets it stands. Second, the commission stated that the timing for such rulemaking proposed by Coinbase was inappropriate as the SEC is currently soliciting comments on rules applicable to crypto. Lastly, it noted that the discretion of rulemaking lies with the agency itself.
Despite these reasons, SEC Commissioners Hester Peirce and Mark Uyeda released a joint statement criticizing the decision. They acknowledged the points made by Gensler but suggested that the issues raised in Coinbase’s petition deserved more consideration.
The two Commissioners proposed that exploration of these issues should include public roundtables, concept releases, and requests for comment to hear from a broad range of market participants and interested parties.
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