SEC Responds to Coinbase’s Rulemaking Petition; Details Remain Shrouded

Coinbase’s Chief Legal Officer, Paul Grewal, revealed that the U.S. Securities and Exchange Commission (SEC) has communicated with the Third Circuit regarding Coinbase’s rulemaking petition, marking progress in their legal dispute. However, the details of the SEC’s response remain vague, causing concern.

Today the SEC provided its court-ordered update to the Third Circuit in Coinbase’s mandamus action: yesterday the SEC staff made some kind of recommendation to the Commission related to our rulemaking petition. That’s it. That’s the whole update. 1/3 pic.twitter.com/eIPTaZrjR3

— paulgrewal.eth (@iampaulgrewal) October 11, 2023

Back in April 2023, Coinbase filed a mandamus petition, seeking the SEC’s prompt response to their July 2022 rulemaking appeal. After the 120-day period given by the Court, on October 10, the SEC staff submitted a recommendation to the Commission for its consideration regarding Coinbase’s rulemaking petition. Despite this, the details of the recommendation were not disclosed in the provided update.

Grewal, while acknowledging the Court’s role in pushing the SEC into action, emphasized the need for a more comprehensive response to Coinbase’s petition. “A formal, public answer to the petition is still long overdue. And given their ongoing enforcement campaign against crypto, the SEC should at least tell the Court its timeline for a decision,” the CLO stressed.

Meanwhile, Coinbase’s CEO, Brian Armstrong, showed determination amidst regulatory challenges. In a recent interview with Yahoo Finance, Armstrong stressed the importance of clear regulations in the US, particularly in the crypto space. He also expressed confidence in Coinbase’s legal case against the SEC, citing the SEC’s recent legal losses.

The legal tension between the SEC and Coinbase began on June 6, when the SEC sued Coinbase, alleging the exchange operated as an unregistered broker, exchange, and clearing agency for cryptocurrencies that were securities. On August 4, Coinbase responded by filing for a dismissal of the SEC lawsuit, arguing that crypto falls out of the regulator’s oversight.

In an October 3 filing, the SEC asked a federal judge to deny Coinbase’s dismissal motion, claiming that Coinbase had “known all along” that the cryptocurrencies it sold were securities under the Howey test. Grewal criticized the SEC’s filing as being “more of the same old same old,” making “sweeping claims of what the law is/must be without any legal citation.”

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