Crypto Exchange Coinbase Sues the SEC, Demands Court Compel Response to Rulemaking Petition – Here's the Latest
Coinbase has asked a court to compel the Securities and Exchange Commission to respond to its July 2022 petition that asked for clearer crypto regulation guidelines.
On Monday, the company filed a lawsuit with a federal appellate court in Philadelphia, arguing that the SEC hasn’t been reasonable or prompt in providing a response.
The lawsuit alleged that "the SEC refuses to address Coinbase’s rulemaking petition" even as the agency expresses intentions to initiate enforcement proceedings against Coinbase for listing allegedly unregistered securities.
In July last year, Coinbase filed a petition with the SEC to write regulations explaining how securities laws apply to cryptocurrency and to engage in a formal notice-and-comment process to allow the public to weigh in.
The largest crypto exchange also submitted a comment to the agency last month, asking for more clarity on the SEC’s views on staking services, which is when users lock crypto assets for a set period of time to help support the operation of a blockchain and earn rewards in return.
Coinbase Chief Legal Officer Paul Grewal wrote in an accompanying blog post that the exchange is not asking the court to tell the SEC how to respond.
“We are simply requesting that the Court order the SEC to respond at all, which they are legally obligated to do."
Coinbase Floats Idea of Leaving the US Amid Regulatory Uncertainty
The SEC has launched an aggressive crackdown on the crypto industry following the catastrophic collapse of cryptocurrency exchange FTX last year.
So far this year, the agency has taken action against crypto exchanges Bittrex and Gemini, crypto lender Genesis, and a number of individual actors accused of manipulating crypto assets, including crypto entrepreneur Justin Sun and disgraced Terraform Labs founder Do Kwon.
Just recently, the SEC also sent a “Wells notice” to Coinbase, threatening the crypto exchange with legal actions regarding some of its listed digital assets, its staking service Coinbase Earn, Coinbase Prime, and Coinbase Wallet.
Addressing the growing regulatory uncertainty in the US, Coinbase CEO Brian Armstrong has indicated that the exchange could leave the US if regulators don't clarify their approach to the digital asset space.
"Anything is on the table, including relocating or whatever is necessary," he said during the Innovate Finance Global Summit last week.
"I think the U.S. has the potential to be an important market for crypto, but right now we are not seeing that regulatory clarity that we need."
As reported, Coinbase is considering setting up a digital asset exchange outside the United States amid increasing regulatory pressure and a souring banking climate for crypto firms.
In March, Armstrong warned that a hostile regulatory approach by the SEC could drive the crypto industry outside of the United States.
The crypto boss said that almost all major financial hubs, including Singapore, Hong Kong, London, and most recently, the European Union, have introduced comprehensive crypto legislation, adding that the US should also follow suit if it doesn't want to lag behind.