The U.S. Securities and Exchange Commission (SEC) charged crypto exchange operator Coinbase last week, accusing it of violating the U.S. securities law. The crypto company has filed an official request in federal court after facing vague responses from the SEC. Paul Grewal, Chief Legal Officer for Coinbase, took it to Twitter, expressed concern about the government’s defiance of a federal court’s direct question, and criticized the SEC’s evasive response.
We couldn’t wait until our deadline next week to address the SEC’s response to the June 6 order from the Third Circuit. It is unusual for the government to defy a direct question from a federal court. But the SEC’s evasive response goes further, as we set out today.
Paul Grewal on Twitter
In its filing, Coinbase is seeking a “mandamus,” a court order issued by a higher court to a government agency, instructing them to perform a specific action or duty they are legally obligated to do. In simpler terms, Coinbase is asking a federal judge to compel the SEC to establish clearer rules and standards for the digital assets industry, which was the objective of a previous petition made by the crypto exchange.
The SEC’s steadfast silence about the Catch-22 it has created for the industry increasingly appears less an inadvertent byproduct of the SEC’s regulatory approach, and more the agency’s intended outcome. The Commission has known for years of the critical lack of regulatory clarity for the crypto industry.
Coinbase Appeal
Although the SEC never responded to the petition, it sued Coinbase earlier this month, alleging that the company failed to register as an exchange, clearing house, and broker, despite offering these services to investors. The lawsuit also claims that Coinbase sold unregistered securities on its platform.
A judge ordered the regulator to address the petition in response to the SEC’s action. Coinbase stated that it was still considering its course of action. Grewal tweeted that the SEC’s refusal to provide a timeline for acting on Coinbase‘s petition demonstrates that further delay is pointless, and he suggested that the court order the SEC to report on its actions.
Coinbase criticized the SEC, accusing it of pushing the limits of cognitive dissonance by demanding compliance with non-existent rules. The commission, led by Chairman Gary Gensler, has claimed that clear rules exist. However, recent news reveals that the SEC has requested that the courts reject Coinbase‘s request for clearer rules.
Despite the SEC’s claim that it is ready to assist, Coinbase maintains that the agency does not intend to establish a definitive regulatory scheme. The company argued that the SEC’s inconsistent actions have created a “Catch-22” situation for the industry.
Coinbase remains unwavering in its pursuit of a well-defined regulatory framework, despite facing challenges from the SEC. The filings made on Saturday reiterated Coinbase‘s stance that the SEC’s actions have been contradictory, hindering progress in the industry.
