Coinbase moves forward with appeal of SEC’s rulemaking petition denial

Coinbase on Monday continued its effort to nail down concrete industry rules from the US Securities and Exchange Commission.

Attorneys for the American exchange giant filed their opening brief in their case against the SEC in the Third Circuit Court of Appeals. Coinbase is asking the court to grant their petition for review, overturn the SEC’s denial and order the securities regulator to begin the rulemaking process.

“The [SEC] is asserting sweeping new authority over a vibrant, rapidly expanding industry — digital assets,” Coinbase’s team wrote in the brief. “But the SEC is pursuing this power grab through enforcement actions, and it has refused to set forth its new interpretation of its enabling statutes in a rulemaking, where the lack of legal basis for its self-aggrandizement would be laid bare.”

The exchange argues that the SEC acted arbitrarily in denying the petition for rulemaking, which Coinbase filed in June 2022.

“Digital asset firms are therefore in a Catch-22 of the SEC’s own making: The agency insists they comply with its regulations, but it refuses to conduct the rulemaking needed to establish regulations by which firms feasibly could do so,” Monday’s filing read.

The SEC denied Coinbase’s petition for rulemaking in December 2023 in a 3-2 Commissioner vote. In his supporting statement, SEC Chairman Gary Gensler said the petition was denied because digital assets already fall under existing rules and regulations.

In a joint dissenting opinion, Commissioners Hester Peirce and Mark Uyeda said Coinbase’s petition highlights “issues presented by new technologies and other innovations, and addressing these important issues is a core part of being a responsible regulator.”

Coinbase promptly appealed the decision, arguing that the SEC’s denial is an “abuse of discretion and contrary to law, in violation of the Administrative Procedure Act.”

Monday’s filing comes as a separate case between Coinbase and the securities regulator continues in New York. The SEC in June sued Coinbase for allegedly operating as an unregistered broker, exchange and clearing agency.

Both parties in January presented oral arguments relating to Coinbase’s motion to dismiss the suit. Presiding Judge Katherine Polk Failla has not yet ruled on the motion.

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