SEC Asked to Report in Coinbase's Crypto Rulemaking Case in Next 120 Days

SEC Asked to Report in Coinbase’s Crypto Rulemaking Case in Next 120 Days

Updated: 21 June 2023

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In the ongoing SEC vs Coinbase case, the United States Court of Appeal for the Third Circuit announced on Tuesday that it would retain jurisdiction in the fight led by Coinbase to seek clarity on crypto regulations from the Securities and Exchange Commission (SEC).

As per the order, the court will not rule on the petition for a Writ of Mandamus presently, allowing the SEC to submit its reply.

On balance this is good news for @Coinbase.

The Third Circuit has ordered the SEC to update the Court on whether it has decided to grant Coinbase’s petition for rulemaking in October.

If the SEC says that it hasn’t decided by then, the odds swing in favor of @Coinbase. https://t.co/GeBSt0AAG9

— MetaLawMan (@MetaLawMan) June 20, 2023

Is SEC Ready to Drop Some Clarity on Crypto Rules?

According to the court’s order, the SEC must submit a report on basic crypto rules within 120 days. The stance comes after the SEC denied Coinbase’s request to reply, asking the court to grant them additional time.

The SEC’s crypto rulemaking efforts have been criticized by many as being too slow and cautious. Furthermore, the agency has been accused of being out of touch with the rapidly evolving cryptocurrency market. As such, the judge’s order is a sign that the SEC is under pressure to clarify its position on crypto regulation.

The report is anticipated to address various significant concerns, such as the definition of security, which is expected to impact the entire cryptocurrency community. Furthermore, it is likely to categorize cryptocurrencies and define the SEC’s jurisdiction to regulate them.

Coinbase’s Chief Legal Officer, Paul Grewal, also confirmed that the U.S. SEC is expected to release a report on fundamental crypto regulations within the next 120 days on Twitter. According to him, they are grateful that the court will keep shining a light on an SEC process that is now being operated in darkness.

The Third Circuit just ruled that it will retain jurisdiction over our challenge to the SEC’s inaction on our petition for basic rules for crypto. A further report is due in 120 days. We are grateful that the Court will continue to shine a bright light on an SEC process that… pic.twitter.com/wQu52UuCoU

— paulgrewal.eth (@iampaulgrewal) June 20, 2023

Paul appeared positive about the outcome a week after he mentioned that the SEC repeated the fallacy that they have not decided to take any action to enforce new crypto rules.

I love all the Circuits. 🙂 But today this Circuit is especially deserving of praise for upholding the basic idea that the SEC is accountable under the law, too.

— paulgrewal.eth (@iampaulgrewal) June 20, 2023

As such, the recent order by the Circuit deserves praise for upholding the basic idea that the SEC is accountable under the law, too.

Positive Development for Coinbase in Crypto Rules Battle

For Coinbase, a favorable outcome in the case could validate its approach to compliance and potentially set a precedent for other exchanges. It would also enable the company to streamline its operations and expand its services, knowing the regulatory boundaries within which it can operate.

The Third Circuit’s instruction to the SEC to update the court on its decision to approve or deny the petition is perceived as a positive development in Coinbase’s pursuit of obtaining unambiguous regulations on cryptocurrencies.

In the event that the SEC decides not to make a move in the additional time provided, a ruling will most likely land in Coinbase’s favor. If this were the case, the court would have to issue the Writ of Mandamus, and the SEC would need to reply with “Yes” or “No”.

The anticipation of the SEC’s report on Coinbase’s crypto rulemaking case has already had an impact on the cryptocurrency market. The major tokens listed as securities have since plummeted. Traders and investors closely monitor regulatory developments, which can significantly affect market sentiment and asset valuations.

A clear regulatory framework will likely attract more institutional investors to the crypto market, giving them a greater sense of security and compliance. However, if the SEC’s report fails to provide the desired clarity or imposes overly restrictive regulations, it could dampen market sentiment, hindering the growth of the space.

5/6: Coinbase’s mandamus action against the SEC adds more complexity. The court’s response to the SEC’s suit and Coinbase’s pending petition for rulemaking will be revealed soon. This legal development can have implications for the entire crypto industry. #CoinbaseVsSEC

— Dan Gambardello (@cryptorecruitr) June 12, 2023

As such, the next 120 days will be crucial, as the report will most likely shape the future of cryptocurrency regulation and influence the trajectory of the rapidly evolving market.