​Coinbase sues SEC to disclose crypto regulation rules

What’s new? On April 24, US crypto exchange Coinbase filed a lawsuit in federal court against the Securities and Exchange Commission (SEC) seeking clarity from the agency regarding the regulation of the crypto industry. The exchange’s representatives intend to get a response to Coinbase’s pending petition asking for clear guidance for crypto companies operating in the United States. Coinbase stressed that the firms now risk facing enforcement action by the SEC, although the regulator has not publicly announced how the law will apply to their activities.

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How did events develop? In a petition filed in July 2022, Coinbase demanded that the regulator provide guidance and rules for the community to operate. To date, more than 1700 businesses and individuals have left comments on the document.

Under the Administrative Procedure Act, the SEC must respond to Coinbase’s petition within a reasonable time frame. If the agency does not agree to draft regulations, the exchange will have the right to challenge the decision in court and formally explain the need for the development.

Coinbase believes that the SEC has already decided to reject the petition, but has not yet informed the public. Therefore, the lawsuit of April 24 is designed to force the situation and call for an official response from the SEC.

The exchange’s representatives stressed that they are working hard to update the financial system by creating robust products that expand the use and acceptance of cryptocurrencies. However, a disjointed approach to regulation by various agencies could negatively impact US competitiveness and national security.

Coinbase and regulators. In March, the SEC notified the exchange of possible violations of securities laws relating to certain aspects of its operations, including the undefined segment of digital assets and the staking services of Coinbase Earn, Coinbase Prime, and Coinbase Wallet.

Coinbase’s chief legal officer Paul Grewal stated that the company is “prepared for this disappointing outcome,” but is confident in the legality of its assets and services and is ready to defend them in court. The company stressed that it had previously asked the SEC to clarify its rules for working with cryptocurrencies, but instead received threats from the court.

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In response to the SEC’s attacks, exchange CEO Brian Armstrong urged cryptocurrency users to “elect pro-crypto candidates.” He said that Coinbase would work hard to organize the 50 million or so US citizens who use cryptocurrencies into a political force.

Armstrong later said the exchange could leave the US market if a clear regulatory environment for the crypto industry is not adopted.