A U.S. court has set a tight deadline for the Securities and Exchange Commission (SEC), delivering an ultimatum that requires the regulator to clarify its stance on a rulemaking petition from crypto exchange Coinbase within seven days. This order, handed down by Judge Cheryl Ann Krause of the U.S. Court of Appeals for the Third Circuit, begs the SEC to clarify if they have refused Coinbase’s petition and, if not, how much time they need to deliberate on whether to accept or refuse it.
Coinbase submitted the public petition back in July 2022, urging the SEC to clarify which assets should be considered as securities and how digitally native ones should be regulated. The appeal for clarification resurfaced in April 2023 after the SEC issued a Wells Notice cautioning Coinbase that their staking product constituted unregistered securities. Coinbase’s response was an Administrative Procedure Act challenge in an attempt to compel the Commission to acknowledge the petition.
Coinbase’s Chief Legal Officer, Paul Grewal, highlighted that if the SEC’s response to their petition for rulemaking is a “no,” they must inform them by law as Coinbase possesses the legal right to question the decision in court. Grewal also argued that “rules of the road, from legislation or rulemaking or both, must come before enforcement actions.”
This court order is delivered amidst the escalating legal battle between the SEC and Coinbase. The SEC brought charges against Coinbase on Tuesday for license rule violations and offering unregistered securities through their staking service. Grewal points out that the SEC’s litigation spree against the industry, such as the current case against Coinbase, indicates that the Commission has already denied Coinbase’s rulemaking petition.
Consequently, Grewal urged the U.S. Congress to approve the Digital Asset Market Structure Discussion Draft during a House Agriculture Committee hearing. This bill seeks to establish guidelines differentiating which digital assets are securities or commodities and determine the jurisdiction of enforcement agencies.
In light of Coinbase’s push for regulatory clarity regarding crypto rules, CEO Brian Armstrong recently called on lawmakers to take a stance on cryptocurrency regulations. Armstrong stressed that failure to provide such guidelines could drive innovation away from the U.S., highlighting the importance of achieving a balanced understanding of the potential benefits and pitfalls of cryptocurrency in this ever-evolving market.
The ongoing conflict between Coinbase and the SEC underscores the need for clear regulations within the growing cryptocurrency industry. While providing essential protection to investors, regulators must not hamper innovation and growth by enforcing unclear rules and guidelines. The outcome of this battle will have a considerable impact on the future of the crypto economy in the United States and beyond.
Source: Decrypt
