On Friday, the SEC publicly said no to Coinbase’s petition attempting to clarify the securities laws applicable to cryptocurrencies. Following this, the exchange once again took the matter to court, while two SEC commissioners showed their support for the platform.
SEC says no to Coinbase petition
On July 21, 2022, Coinbase surprised the cryptocurrency ecosystem by launching a petition in an attempt to force the Securities and Exchange Commission (SEC) to clarify its securities laws.
And with good reason, as we’ve seen time and again, the vagueness surrounding the conditions under which the SEC does or does not consider a cryptocurrency to be a security.
After the regulator pulled out all the stops to delay its response and the courts forced it to issue a verdict, a statement was made this Friday, and the answer could be summed up in a single word: no.
The SEC thus rejects the petition, and Gary Gensler, its chairman, himself said he was happy to have supported the decision, for three reasons:
First, existing laws and regulations apply to crypto securities markets. Second, the SEC also addresses crypto securities markets through rulemaking. Third, it’s important to retain the Commission’s discretion in setting its own regulatory priorities. “
Following this, the interested party develops a long exposé in which he contradicts Coinbase’s arguments point by point. He takes the view that current laws are sufficient in themselves to define whether the sale of a cryptocurrency constitutes an offer of a security, and that there is neither the need nor the urgency to change the regulatory framework.
Coinbase goes to court again
Despite this setback, the cryptocurrency platform behind the petition has not conceded defeat, and its General Counsel, Paul Grewal, has once again taken the case to the Third Circuit.
In his letter to the Court of Appeals, he describes the SEC’s decision as “arbitrary and capricious”:
1/3 Promise made, promise kept: we are now on file with Third Circuit to challenge the SEC’s arbitrary and capricious denial of our petition for crypto rulemaking. We again appreciate the Court’s consideration.
– paulgrewal.eth (@iampaulgrewal) December 15, 2023
Meanwhile, Brian Armstrong has aligned himself with his General Counsel’s comments, and is now questioning why the SEC is refusing to clarify the regulatory framework:
Nice small win. We went to court to challenge the SEC’s refusal to create clear rules for the industry – and it worked (a court compelled them to respond).
Now that they’ve formally responded (with a no!) we can challenge their response in court, which helps us get one step… https://t.co/3RcTk1OVcp
– Brian Armstrong ️ (@brian_armstrong) December 16, 2023
Despite the negative response from the US financial regulator, it is important to note that at least 2 of its 5 commissioners have come out against this decision. They are Hester Peirce and Mark Uyeda.
The two have issued a statement of their own, to make their position known and encourage other crypto players to take their turn in trying to shake up the status quo, calling for round tables or requests for comment :
“We hope that interested parties will continue to propose specific rule changes, guidance and exemptions that would provide a useful foundation for the crypto industry to continue to develop in the United States. While we are disappointed that the Commission is not hosting these important conversations, we will continue to listen to conversations organized by others and the ideas that emerge.”
