The crypto exchange Coinbase has recently filed a lawsuit against the SEC, led by Gary Gensler, in response to the denial of clear and transparent regulations for cryptocurrencies. Let’s see all the details below.
Summary
Coinbase takes legal action against the SEC after refusal on regulation
As previously announced, Paul Grewal, Chief Legal Officer of Coinbase, today announced that the cryptocurrency exchange platform intends to refile a lawsuit against the SEC.
This time, the legal action is motivated by the Commission’s refusal to consider the regulatory petition submitted by the company.
Previously, in fact, the United States Securities and Exchange Commission rejected Coinbase’s request to clarify the new cryptographic rules for the digital asset sector.
Last year, the largest exchange of cryptocurrencies in the United States filed a petition with the SEC, requesting the formulation and adoption of new rules for the optimal regulation of native digital securities.
Following the SEC’s failure to respond in a timely manner, Coinbase had previously taken the case to court in April, seeking the court’s intervention to obtain a response from the main regulatory body.
However, now the SEC has issued a denial. SEC Chairman Gary Gensler stated the following in a Friday note:
“Currently, the existing securities regime adequately manages cryptocurrency securities.”
In response, Grewal has published a post on a platform similar to Twitter, announcing the intention to challenge the decision, in which the following can be read:
“After 18 months of silence, we went to court to get the answer that the law requires. With appreciation for the Third Circuit, later today we will once again seek its help, challenging the SEC’s abdication of its duties.”
Grewal has also added:
“No one who looks impartially at our industry thinks that the law is clear or that there is no other work to be done.”
The details of the dispute over cryptocurrency regulation
The Securities and Exchange Commission (SEC) and Coinbase are in a constant clash regarding the regulation of cryptocurrencies in the world’s largest economy.
As we know, Coinbase, based in San Francisco, is a platform that allows users to buy and sell Bitcoin, Ethereum, and many other cryptocurrencies.
The company claims that the SEC does not provide sufficiently clear rules, while the SEC accuses the platform of selling unregistered securities in June, triggering a massive lawsuit against it.
The core of the disputes mainly focuses on the issue of determining whether certain cryptocurrencies should be considered securities or not.
The SEC’s lawsuit against Coinbase mentions several significant cryptocurrencies, including Cardano, Polygon, and Solana, as unregistered securities.
The chairman of the SEC, Gary Gensler, has repeatedly stated that most cryptocurrencies and digital tokens, with the exception of Bitcoin, likely fall into the category of unregistered securities.
This implies that exchanges that allow the trading of such assets could face legal actions from regulatory authorities.
Recently, the SEC has also filed a similar lawsuit against another cryptocurrency exchange based in San Francisco, Kraken.
However, not all members of the SEC agree with the current decision. For example, commissioners Hester Peirce and Mark T. Uyeda have expressed their disappointment that the Commission is not addressing the important discussions on the meaning of securities.
Commissioner Peirce has previously criticized the SEC, calling it “ambiguous” and “uninterested in facilitating innovation and competition in the financial markets.”
In response, Coinbase’s Grewal commented on Twitter:
“We are grateful that two Commissioners did not agree with the denial and have called for a real dialogue. We should work together to create laws and regulations that benefit consumers and American innovation, not to defend legal cases based on legal positions that change month after month.”
A step back: the SEC’s refusal
As anticipated, the United States Securities and Exchange Commission (SEC) has once again rejected Coinbase’s request for updated regulation for cryptocurrencies.
In a statement, the president of the SEC, Gary Gensler, declared that the security agency believes that the current regulations are adequate and supported the decision to deny Coinbase’s petition.
Gensler explained that existing laws and regulations already apply to the cryptocurrency markets.
In addition, he emphasized that the SEC regulates the crypto securities markets and defended the need to maintain the Commission’s discretion in defining its own regulatory priorities.
The chairman of the SEC added that, in situations where cryptocurrencies are treated as investment contracts or when intermediary entities handle cryptocurrency securities transactions, federal securities laws apply.
The SEC started 2023 with a strong focus on the cryptocurrency sector, and in response to this regulatory action, Coinbase had requested a review and greater clarity on cryptocurrency regulation.
The Coinbase petition, which went unanswered for nine months, sought to clarify the nature of securities and the SEC’s decision-making process.
The SEC’s response in May had rejected the request, indicating that the new rules were not necessary, as it considers digital assets as securities.
Gensler stated in the recent declaration on December 15th that the SEC is open to collaborating with cryptocurrency projects and intermediaries that intend to comply with the law.
It has also reiterated the use of the SEC standard, the Howey test, to determine whether an investment contract constitutes a security, arguing that this test is sufficient and flexible enough to adapt to the various dynamics of the cryptocurrency industry.
The statement concludes with a disclaimer, specifying that the article is provided for informational purposes only and should not be used as legal, tax, investment, or financial advice.
