Federal financial regulators are girding for a fight with crypto exchange Coinbase in court next year, and set the stage Friday by dismissing a petition by the company to craft new, tailored rules for the industry.
The Securities and Exchange Commission denied a petition for rulemaking that Coinbase
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made last year, demanding the agency bring “regulatory clarity” to crypto markets with fit-for-purpose regulations.
“There is nothing about the crypto securities markets that suggests that investors and issuers are less deserving of the protections of our securities laws,” SEC Chair Gary Gensler said in a statement Friday.
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Coinbase submitted its petition for rulemaking in July 2022, and in April of this year brought an action demanding the SEC reply to the petition with a yes-or-no answer.
“If the SEC says no to our rulemaking petition, which it has the right to do, then Coinbase would be allowed to challenge that decision in court and explain in that formal setting why rulemaking is required,” wrote Paul Grewal, Coinbase’s chief legal officer, at the time.
“So it’s important for the SEC…to reply to the petition once the agency has made up its mind, especially if the answer is no — otherwise the public can never exercise its right to ask a court if the agency’s decision was proper,” he added.
Grewal said in a post on X Friday that the company would challenge the denial in federal court.
“No one looking fairly at our industry thinks the law is clear or that there isn’t more work to do,” he wrote. “We should be working together to create laws and rules that will benefit consumers and US innovation, not defending lawsuits based on legal positions that change month after month.”
The denial comes as Coinbase is preparing to fight separate charges brought by the SEC that the company is operating as an unregistered securities exchange, clearing agency and broker.
The SEC argues that because several of the crypto tokens offered by Coinbase face the definition of a security under federal law, the company has violated those statues by not registering with the agency.
Coinbase denies that the tokens listed on its exchanges are securities.
The company will plead its case before a federal assess on Jan. 17, when it will argue that the court should dismiss the SEC’s charges outright.
