The U.S. Securities and Exchange Commission (SEC) said Tuesday it had not decided whether it will reply to Coinbase’s rulemaking petition. The Wall Street regulator said it anticipates requiring four months to respond potentially and that the lawsuit against the San Francisco-based exchange is not inconsistent with any decision on rulemaking.
SEC Requests For More Time To Respond To Coinbase’s Rulemaking Request
The U.S. SEC has said it needs 120 days to respond to Coinbase’s request that it adopt new rules and clarify which crypto assets should be regarded as securities.
In a June 13 filing, the Commission said it “has not decided what action to take on Coinbase’s rulemaking petition.”
This comes after the U.S. Court of Appeals for the Third Circuit’s judge Cheryl Ann Krause — who noted the SEC’s complaint filed last week — ordered the SEC to clarify its position on the rulemaking petition from Coinbase. Judge Cheryl ordered the SEC to explain within 7 days if it intends to decline Coinbase’s request, the reasons for such a decision, or a timeline of when it expects to come to a decision.
The SEC claimed Coinbase’s “extraordinary request” for a writ of mandamus has “no merit”. The securities regulator maintained that the mandamus petition should be rejected, but it thinks it will make a recommendation “within the next 120 days.” It has offered to provide the court with a status report by Oct. 11, 2023.
“Regardless of whether the Commission determines to undertake the rulemaking sought by Coinbase, a decision the Commission has yet to make, Coinbase — like everyone else — is bound by existing law,” the SEC filing stated. “And Coinbase is free to vigorously assert its position that it has not violated that law in the current enforcement action.”
Earlier last week, the SEC hit America’s largest digital asset exchange with a suit, alleging that it operated as an unregistered securities exchange for years and “elevated its interest in increasing its profits over investors’ interests.”
Paul Grewal, the Chief Legal Officer at Coinbase, slammed the SEC’s response in a tweet, saying the agency “ignore[d] the clear statements of the Chair that confirm they have no intent to issue new rules, and instead conflate the evidence of a decision those statements provide with an argument that the statements are themselves a decision,” adding that “they refuse to commit to any deadline despite the Court’s explicit order.”
What’s Coming Next?
The SEC’s legal battle with Coinbase is only part of a wider clampdown on the fast-growing crypto sector, steered by Chair Gary Gensler, who has on multiple occasions stated that all digital assets — excluding bitcoin — are securities.
With the SEC’s response to Coinbase’s rulemaking petition not providing any clarity on the agency’s current stance, the crypto industry will continue to operate in an environment of legal uncertainty. This likely means a years-long litigation battle for Coinbase and Binance and an uncertain future for token projects mentioned in the two lawsuits.