The U.S. Securities and Exchange Commission (SEC) said in a court filing Monday that judges should deny an April request filed by cryptocurrency exchange Coinbase as part of the ongoing legal dispute between the two. That request, if granted, would compel the regulator to publicly respond to the exchange’s July 2022 petition asking for clearer crypto regulation guidelines. The SEC, for its part, claims that Coinbase violated investor protection laws and is threatening enforcement action against the exchange.

See related article: Coinbase says SEC’s legal threats punish transparency, undermine public listing process

Fast facts

  • Coinbase’s original July 2022 petition called for the SEC to  “propose and adopt rules to govern the regulation of securities that are offered and traded via digitally native methods.” The second petition asks for an accelerated response from the SEC, which Coinbase claims it has yet to do.
  • However, in the Monday filing to the 3rd U.S. Circuit Court of Appeals, the SEC said that Coinbase is not entitled to “the extraordinary relief it seeks.” Additionally, it said that no statute or regulation requires the SEC to act on Coinbase’s earlier petition according to a specific timeline.
  • Coinbase has claimed its operations are being harmed because it cannot adequately structure its businesses and plan for the future in the absence of adequate regulation.
  • The SEC denied that claim in Monday’s filing, saying that — while purported economic harm will sometimes be sufficient to justify court intervention — “there is no such cognizable harm here.”
  • The regulator added that it believes claims by Coinbase of sustained harm over the course of the 10 months since the petition are not genuine.
  • Coinbase argues that the SEC has secretly decided to deny the original 2022 petition but is refusing now to acknowledge that in order to avoid judicial review.
  • “This claim is baseless,” the SEC said in the filing, adding that it continues to assess Coinbase’s petition according to due process.
  • Meanwhile, the SEC said that — even while it is in the process of formulating new rules — it is still within its rights to conclude that an actor in the securities industry has violated existing regulatory requirements.
  • Paul Grewal, chief legal officer of Coinbase, tweeted Tuesday that the SEC’s stance reinforces Coinbase’s longstanding concern that “our industry does not have clarity on what the SEC may consider to be within or outside its jurisdiction at any time, and it is likely to continue changing its mind along the way.”
  • Coinbase plans to issue its own formal reply to the SEC next week, according to Grewal.
  • The latest dispute between Coinbase and the SEC comes after the crypto exchange in March received a so-called Wells notice from the SEC, which warned the company over potential legal action for its cryptocurrency staking services and other products.
  • Also on Monday, SEC Chair Gary Gensler responded to questions regarding the lack of regulatory clarity in the crypto industry. He used a speech at the Financial Markets Conference to argue that “the rules have already been published.”
  • Gensler added that the SEC has already put out rules on what is required to be an exchange, broker-dealer or advisor. The same applied for rules regarding custody assets and securities offering registration, he said.

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