Coinbase Says SEC is ‘Choking’ Crypto Industry

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Coinbase Calls Out SEC’s Stifling Tactics, Demands Regulatory Clarity
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Coinbase has intensified its push for the US Securities and Exchange Commission (SEC) to initiate formal rulemaking for digital assets.

In its closing brief on May 31, the crypto exchange called on the appeals court to compel the financial regulator to establish clear regulations for the emerging industry.

Coinbase Challenges SEC’s Regulatory Approach

Coinbase asserts that the SEC’s enforcement strategy leaves crypto firms in a “Catch-22.” The exchange claims the SEC demands compliance with an overly broad interpretation of its authority while aggressively litigating against firms. Coinbase argues that the SEC imposes major policy changes through punitive measures, overstepping its bounds.

In its brief, Coinbase contends that the SEC’s approach violates the Administrative Procedure Act (APA), which mandates rulemaking for significant policy shifts. The brief highlights that the SEC’s inconsistent policies on digital assets lack a coherent legal standard, making compliance unfeasible for the industry.

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“The SEC has exploited [regulation-by-enforcement] approach to assert broad, yet ill-defined, jurisdiction over a new and dynamic industry, without articulating in advance its understanding of the law through rules vetted by public comment and pre-enforcement judicial review,” Coinbase stated.

Read more: Best Coinbase Alternatives in 2024 for Trading Crypto

Moreover, Paul Grewal, Coinbase’s Chief Legal Officer, reiterated this stance on social media, stressing the importance of the legal battle. He argued that the Commission has not provided substantive reasoning for rejecting the firm’s call for tailored regulations. Instead, Grewal claimed that the SEC is overreaching its authority without congressional authorization and establishing clear rules for the emerging digital asset industry.

“Remarkably, the SEC’s says – over and over again – that it doesn’t matter if the industry can comply with the rules. The SEC is bent on choking the digital asset industry, and is refusing to provide the necessary rules the industry has requested in order to tighten the squeeze,” Grewal asserted.

Read More: Coinbase Review 2024: The Best Crypto Exchange for Beginners?

Coinbase filed its rulemaking petition against the SEC two years ago. Initially unresponsive to the petition, the regulator said it could not be forced to create specific crypto rules. However, Coinbase and other crypto stakeholders have consistently maintained that the lack of rules harms the industry. The result of this legal battle could greatly impact the future of digital assets in the US, influencing regulations for many years ahead.

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