Coinbase has thrown out a formal appeal against the US Securities and Exchange Commission (SEC), criticizing the regulator’s denial of its rulemaking petition and challenging the SEC’s authority over the digital asset space.
Coinbase has thrown out a formal appeal against the US Securities and Exchange Commission (SEC), criticizing the regulator’s denial of its rulemaking petition and challenging the SEC’s authority over the digital asset space.
In a series of posts, Paul Grewal, Coinbase’s chief legal officer, described the company’s frustration with the SEC’s “shallow denial” and lack of clear justification.
It has highlighted the inconsistency in the SEC’s stance on its regulatory authority over digital assets.
The SEC’s Changing Stance and Coinbase’s Challenge
For years, the SEC has acknowledged its limited authority in the digital assets space, prompting calls for Congress to give it broader regulatory powers.
However, Coinbase maintains that the SEC has abruptly claimed broad authority and launched a broad enforcement campaign against the crypto industry, frequently altering its legal interpretations.
Grewal emphasizes that any assertion of new authority by the SEC must be accompanied by a formal rulemaking process. This is a step that the SEC has skipped, leading to what Coinbase sees as a “disjointed regulation by enforcement” approach.
Legal and practical complexities
Coinbase’s appeal shows the practical difficulties of applying traditional securities regulations to digital assets, which inherently settle without the physical delivery of securities certificates.
The brief argues that treating all entities involved in digital asset transactions as “clearing agencies” under these conditions is unfeasible, especially for decentralized blockchain components that operate autonomously.
Coinbase maintains that this lack of a clear regulatory framework not only hinders the viability of existing laws for digital assets, but also fails to provide the necessary guidance for the industry. This undermines the legal and operational foundations of the digital asset market.
