Coinbase, a leading player on the cryptocurrency exchange market, has taken a bold legal step, filing a closing brief in the Third Circuit, challenging the SEC’s denial of its rulemaking petition.
Coinbase's legal struggle with the SEC began when the exchange filed a petition requesting that the SEC provide clear and consistent regulatory guidelines for the cryptocurrency industry.
Coinbase argued that the lack of defined rules creates uncertainty and hinders the growth and innovation of digital assets in the United States. The SEC, however, denied this petition, leading Coinbase to seek judicial intervention.
Coinbase chief legal officer Paul Grewal highlights the new development in the legal tussle in an X post. He gives a recap of the pivotal filing in a few threads of tweets.
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According to Grewal, the core of this case is a single, concluding sentence in the SEC order under review. The sentence — which disagreed that SEC rules are unworkable for digital asset firms — offered no reasoned decision-making, adding that it offered no reason at all.
Today we filed our closing brief in the Third Circuit challenging the SEC’s denial of our rulemaking petition. At the core of this case is a single, conclusory sentence in the SEC order under review. That sentence—which “disagree[d]” that SEC rules are unworkable for digital…
— paulgrewal.eth (@iampaulgrewal) May 31, 2024
On this premise, Coinbase seeks that the SEC’s order be vacated on this elementary ground alone. In its closing brief, Coinbase argues that the SEC cannot claim broad jurisdiction over a new industry without proper authorization from Congress and without making clear rules.
The SEC's stance has been that digital assets already fall under existing rules and regulations, as stated by SEC Chairman Gary Gensler. However, Coinbase and other industry players seek regulatory clarity around how existing securities laws might apply to the digital asset sector.
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Coinbase's brief alleges that the SEC was bent on choking the digital asset industry and, therefore, its refusal to provide the necessary rules the industry has requested to tighten its squeeze.
As the Third Circuit considers Coinbase's closing brief, the crypto community watches with bated breath. The decision will have far-reaching implications, not just for Coinbase, but for the entire digital asset ecosystem. It is a pivotal moment that underscores the need for a clear regulatory framework that supports innovation while protecting investors.