US SEC is being forced to say yes or no to Coinbase’s pending rulemaking petition

Updated: 25 April 2023

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America’s largest cryptocurrency exchange, Coinbase, recently made a move against the US SEC. According to the company’s Chief Legal Officer, Paul Grewal, Coinbase had filed a “narrow action” in federal court. The firm’s intention is to compel the US securities watchdog to make an official response to Coinbase’s rulemaking petition, which the SEC seemingly ignored for nearly a year.

BREAKING:

Coinbase has filed a lawsuit against the SEC in an effort to push the regulatory body to provide clarity on digital asset regulations.

— WhaleFUD (@WhaleFUD) April 25, 2023

Coinbase is forcing the SEC to respond

The petition was filed in July 2022, requesting that the regulator provides guidance for the crypto industry, which is long overdue. While many other countries managed to establish some level of crypto clarity, the US did not, as the regulators simply continue to crack down on various businesses that did something wrong, likely because there are no guidelines for them to follow.

The petition has been completely ignored by the SEC Chair, Gary Gensler, and his team, according to Coinbase. Now, the exchange decided to take drastic measures and force the regulator to provide crypto clarity or publicly refuse to do it.

Commenting on the move, Grewal said that the SEC is required by law to respond to petitions “within a reasonable time.” He added that “It’s obvious that there’s a lack of clarity among our regulators regarding crypto, as even the chair of the SEC has declined to say which crypto assets are securities.”

Given how long it has been since the petition was filed, and the SEC failed to react, Coinbase decided to change its tactics and demand an answer.

Grewal’s words represent the sentiment of the entire crypto industry, which has been asking for clarity on cryptocurrency matters for years. He said, “Enforcement actions based on inapplicable securities law aren’t the answer.”

The fight for crypto clarity in the US has started

So far, over 1,700 entities have submitted comments to the petition, according to Coinbase. Should the regulator refuse the petition, Coinbase will have grounds to challenge its court decision. However, given the SEC’s war on crypto companies, it appears that the regulator has made up its mind about the digital currency industry.

Grewal further noted that the SEC’s enforcement actions were brought based on a view of the law that was not yet shared with the public. With that being the case, crypto companies do not know what they can and can’t do, nor what they are obligated to do. That way, making a mistake is unavoidable, and it appears that the SEC is only waiting for it to happen so that it can file another lawsuit.

While the SEC ignored Coinbase’s petition, it did find the time to target the exchange and issue a Wells Notice, threatening enforcement action against the exchange in March 2023. The situation escalated to the point where the platform’s CEO, Brian Armstrong, recently hinted that Coinbase might leave the US, which seems very likely now that the platform got a license to operate in Bermuda.

In order to allow crypto users to show their support, Armstrong also minted a Stand With Crypto NFT collection on April 25th. The project allows those who support the struggle for regulatory clarity to mint a blue shield badge for free and use it on Twitter. The NFT is purely commemorative, featuring an open mint, and it has no intended value or utility beyond showing support.