Coinbase Pursues Legal Action Against SEC for Ignoring Rulemaking Petition

Cryptocurrency exchange Coinbase has taken legal action in a US federal court to compel the Securities and Exchange Commission (SEC) to provide a definitive answer to a pending petition.

The petition was initially filed by Coinbase in July 2022 and sought the SEC's proposal and adoption of clearer regulatory guidelines for the cryptocurrency industry in the US.

Coinbase had presented a list of 50 detailed questions related to the regulatory treatment of specific digital assets, according to Cointelegraph. how tokens are classified as securities and guidelines for buying and selling cryptocurrencies on SEC-regulated exchanges.

Coinbase's Chief Legal Officer, Paul Grewal, wrote in a blog post that the Administrative Procedure Act legally requires the SEC to respond to the exchange's rulemaking petition "within a reasonable time."

After waiting for more than nine months without any response, the exchange is making a strong effort to obtain an answer.

The exchange believes that the SEC has already made up its mind to deny their petition, but they haven't made it public yet. Therefore, the exchange has filed a request with the court to ask the SEC to share its decision.

Grewal stressed the importance of getting a response from the SEC once it has made up its mind, especially if the answer is negative.

This is crucial for providing clarity to the crypto industry, particularly as Coinbase received a Wells Notice from the SEC on March 22, which suggested potential enforcement actions against them.

Grewal pointed out that Coinbase and other crypto companies are at risk of facing regulatory enforcement actions from the SEC, even though they haven't been informed about how the SEC believes the law applies to their business.

On Feb. 9, Kraken, a peer exchange of Coinbase, settled with the SEC for $30 million for not registering their staking-as-a-service program, which the SEC deemed as securities.

This decision was not well received internally, with SEC Commissioner Hester Peirce criticizing the SEC's actions as an inefficient and unfair way of regulating and shutting down a program that had been beneficial to people.

Earlier this year, on February 12, Paxos, the issuer of Binance USD was ordered by the SEC and the New York Department of Financial Services to stop minting and issuing the token when its price was at $1.00. This was one of many actions taken against the crypto industry in the United States.

Democratic Senator Elizabeth Warren of Massachusetts announced on March 31 that she would form an "anti-crypto army" as part of her Senate re-election campaign, reflecting the growing opposition to the crypto industry in the United States.

In response, Coinbase, the only publicly traded cryptocurrency exchange in the United States, has expressed its intention to move some of its operations overseas.

It has obtained a license to operate in Bermuda and plans to launch a derivatives exchange there as early as this week.

The upcoming earnings report from Coinbase on May 4 will be closely watched by analysts to assess the overall health of the crypto sector in the United States.