Coinbase Sues SEC To Get A Response To A Petition For Regulatory Clarity• April 26, 2023 2:14 pm • Comments
Crypto exchange Coinbase just filed a new lawsuit against the SEC where it asked that the regulator answer a petition that asks if the crypto industry will be regulated by the SEC’s existing framework for securities.
If the answer to this question is “yes”, then it is clear that the SEC considers cryptocurrencies to be securities which will negatively impact the industry.
The petition was made by Coinbase back in July 2022 and it seems that the SEC has still not given a public response to the petition.
Instead of providing a clear answer, the only thing that the SEC has been doing recently is aggressive enforcement actions against crypto exchanges such as Coinbase.
As a result, it is clear why Coinbase has decided to file a lawsuit in order to force the SEC to provide a response.
This could determine the future of cryptocurrency in the United States pic.twitter.com/N0ndh10w0G
— Dark Horseman (@dark_horseman6) April 25, 2023
“From the SEC’s public statements and enforcement activity in the crypto industry, it seems like the SEC has already made up its mind to deny our petition.
But they haven’t told the public yet. So the action Coinbase filed today simply asks the court to ask the SEC to share its decision,” Coinbase chief legal officer Paul Grewal said in a blog post.
Since January, the SEC has taken action against crypto exchanges Bittrex & Gemini, crypto lender Genesis, and a number of individual actors accused of manipulating crypto assets, including crypto entrepreneur Justin Sun and disgraced Terraform Labs founder Do Kwon.
The move is Coinbase’s first formal salvo against the regulator, a little over a month after it was warned by the SEC of pending legal action through a Wells notice.
Usually, it is the SEC that initiates legal action against crypto companies for potential violations.
It is refreshing to see a crypto company such as Coinbase be proactive about the situation and initiative a lawsuit against the SEC.
Coinbase has stated that it does not take legal action lightly, but it had no choice because it is clear that the industry desperately needs regulatory clarity which has not been provided despite many requests.
As a result, crypto companies continued to be targeted by the SEC without being provided any clear reason or indication as to what regulations have been violated in the first place.
The outcome of this lawsuit will be of high interest for crypto investors and the SEC has declined to comment so far.
1/ Here's what you should know about the @Coinbase suit against the SEC.
This will move fast–unlike the @Ripple case.
This case begins in the appellate court, not the trial court.
There will be no discovery (depositions and document exchange), just briefing and a hearing.
— MetaLawMan (@MetaLawMan) April 25, 2023
The lawsuit comes amid a tense standoff between Coinbase and the SEC over the former’s plan to launch a lending product that would allow users to earn interest on their crypto assets.
The SEC has warned Coinbase that it considers the product to be a security and that it intends to sue the company if it proceeds with the launch. Coinbase argues that the SEC has not provided any clear guidance on why or how its product is a security, and that the agency is trying to regulate crypto through litigation instead of rulemaking.
Coinbase’s chief legal officer Paul Grewal said that the company is seeking a “yes or no” response from the SEC to its petition, and that it is not asking the court to decide on the merits of its product or any other crypto issue.
He said that Coinbase is frustrated by the lack of clarity and communication from the SEC, and that it wants to work with the regulator to foster innovation and protect investors in the crypto space.
The best defense is a good offense.
Coinbase v. SEC
Apparently, Coinbase wasn't going to just sit around and wait for the inevitable lawsuit from the SEC. https://t.co/65gZnYJGqr
— Jeremy Hogan (@attorneyjeremy1) April 25, 2023
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