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Cryptogambling / Coinbase’s Request for Urgent Crypto Regulations Faces Opposition from SEC

Coinbase’s Request for Urgent Crypto Regulations Faces Opposition from SEC

Publish Date: 16/05/2023
Key Points
  • SEC seeks denials of Coinbase petition for imminent crypto rules.
  • Coinbase inability to persuasively claim harm caused by SEC's inaction weakens its case for imminent crypto rules.
  • The outcome of this case will likely have a significant implication for the future regulation of cryptocurrencies.

The United States Securities Exchange Commission has issued an official court response regarding Coinbase’s plea for transparent cryptocurrency regulation, emphasizing that the process of formulating rules could extend over several years. In the interim, the SEC has affirmed its commitment to pursuing enforcement actions.

The chief legal officer of Coinbase, Paul Grewal voiced his apprehensions regarding SEC’s reply, emphasizing their willingness to diligently supervise the crypto industry through regulatory measures and enforcement.

According to the filed court documents on May 15, the SEC states that it is not required to comply with Coinbase’s petition demands and that the company has requested a complicated collection of modifications and establishing regulations in an unreasonable length of time.

The SEC further request the court to reject Coinbase’s mandamus petition. the securities regulatory body added that the mandamus is an exceptional measure and that Coinbase is unable to establish a legitimate entitlement to relief.

Paul Grewal tweeted that this may be the first time that the SEC is transparent on its views on whether the SEC should create rules that guide the crypto industry. He, however, retreated that there is still a lot for the security agency to clarify.

2023-05-16 13:35
Today the SEC responded to Coinbase’s petition for a writ of mandamus — asking the court to require the SEC to respond just yes or no to whether it will undertake rulemaking for our industry. The SEC’s answer? A resounding maybe. 1/7
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Arguing against it, the SEC explained to the court said that the rulemaking may take years and there is no need for a rush.

The SEC Chair’s Keynote Disagreement

Moments prior to filing, Gray Gensler, SEC chair asserts in a keynote speech that the rules for crypto were already published and were sufficient.

Video: [FMC 2023] Afternoon Keynote, May 15

[FMC 2023] Afternoon Keynote, May 15

In a noteworthy step, the SEC sought to distance itself from any public statements or opinions made by its chair in its most recent submission, notably with reference to Gary Gensler’s claim that the majority of cryptocurrencies should be treated as securities.

Although Grewal argues that according to the SEC,  the public statements by Gary Gensler are not formal guidance or policy statements from the SEC and the public cannot rely on them as such.

SEC Cites Lack of Obligation and Demonstrable Harm

Neither the securities laws nor the Administrative Procedure Act imposes on the Securities and Exchange Commission an obligation to issue the broad new regulations regarding ‘digital assets’ Coinbase has requested,” the SEC stated, adding that:

“As Coinbase’s own submissions make clear, considering the various paths it suggests is a necessarily complicated endeavor. Yet Coinbase filed its rulemaking petition fewer than ten months ago, supplemented aspects of the petition fewer than three months ago, and sought to supplement the record again only weeks ago.”

The SEC further argue that Coinbase has not made a compelling argument for any harm resulting from the SEC’s delay since the initial filing, which is the basis for their request that the petition be denied. The corporation also fails to offer proof that the Commission’s decision to refrain from regulating is reflected in recent enforcement actions taken by the SEC in the cryptocurrency industry.

What this means to the Crypto Community

Grewal said that “the SEC’s reaction affirms Coinbase’s long-standing worry that there is no certainty in our business regarding what the SEC may at any time deem to be within or beyond its jurisdiction and that it is likely to keep changing its mind along the road.”

The implication of this is that a long time from now, the crypto industry might be arguing about what is and what is not since there is no clear job description for the SEC in the crypto community. There is a need for clarity in black and white.

Final Thought

The SEC has put forth arguments seeking the denial of Coinbase’s petition for imminent crypto rules and challenging Coinbase in the process. The outcome of this case will have implications for the future regulation of cryptocurrencies and the involvement of platforms like Coinbase in shaping the regulatory landscape.

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