In a new filing, the U.S. Securities and Exchange Commission (SEC) has asked the court to reject Coinbase's petition that it be required to develop a new regulatory system for crypto.
Coinbase had claimed in a March filing that the regulator "lacks statutory authority" to extend the existing securities regime to crypto assets, adding that it was "plowing ahead without congressional authorization" and engaging in a "power grab through enforcement actions." The crypto exchange argued that any decision on extending the existing securities regime should be "made and implemented through prospective rulemaking."
Lawyers for the SEC rejected Coinbase's argument that existing regulations are "unworkable," and that a new regulatory framework should be developed "from the ground up," in a filing made on Friday with the U.S. Court of Appeals for the Third Circuit.
The regulator argued that its "incremental approach" to applying the existing regulatory framework to crypto asset securities was "reasonable and well within the Commission’s discretion."
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In a post on Twitter, Coinbase Chief Legal Officer Paul Grewal called the SEC's argument that the current registration process is "workable" a "fallacy," adding that the exchange is, "confident the Court will see this for what it is."
In a nightcap to this busy day, @SECGov also filed their response to the Third Circuit APA challenge we brought to their refusal to pursue notice-and-comment rulemaking. Their basic response: "no additional explication is required to understand the Commission’s policy decision."…
The SEC and Coinbase have been at loggerheads since the regulator sued the crypto exchange in June 2023, alleging that it had failed to register as an exchange, clearing house and broker despite providing investors these services, and had offered and sold unregistered securities via its staking service.
Coinbase has refuted the charges, arguing that tokens listed on the exchange don’t qualify as securities under criteria for so-called “investment contracts.”
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The exchange has pursued an aggressive campaign of court filings and public statements in its bid to push back against what it characterizes as the SEC's "regulation by enforcement" approach, calling for "new legislation and rulemaking" to govern the crypto sector.
Coinbase has also begun courting crypto-friendly political candidates, donating $21.5 million to the Fairshake super PAC. In a tweet earlier this month, Grewal said that its support of the PAC was prompted by the SEC's "litigation campaign," calling for the election of pro-crypto candidates who "understand the need for clear rules of the road."
Despite Coinbase's best efforts, the SEC's lawsuit against the exchange continues to grind on. In late March, the federal judge overseeing the case ruled that it should go ahead, finding that the regulator’s arguments against the crypto exchange are largely “plausible” and denying Coinbase's motion to have the case dismissed outright.
