Coinbase, a cryptocurrency exchange, has filed a lawsuit against the Securities and Exchange Commission (SEC), seeking a federal court to force the SEC to react to its demand for clearer cryptocurrency rules. The lawsuit was filed late on Monday.
Coinbase challenged the U.S. Securities and Exchange Commission using the Administrative Procedure Act. The company asked the Third Circuit Court of Appeals to urge the SEC to offer “regulatory clarity” over how current securities rules would apply to the digital asset industry.
It is widely recognized – including by a sitting SEC Commissioner – that existing SEC registration and disclosure requirements are incompatible with digital assets, which differ fundamentally from the stocks, bonds, and investment contracts for which the securities laws were designed and that the SEC traditionally has regulated. The SEC at a minimum must set forth how those inapt and in-apposite requirements are to be adapted to digital assets. But the SEC has refused to do even that.
The filing said
In July of last year, the exchange sent what is known as a “petition for rulemaking” to the SEC, in which it requested that the regulator establish and approve regulations for digital assets securities. In addition to this, it requested responses to fifty particular questions with the goal of obtaining “clarity and certainty regarding the regulatory treatment of digital asset securities.”
In reference to the Administrative Procedure Act, the law mandates that the SEC respond to Coinbase’s petition within a “reasonable” length of time. This obligation is imposed upon the SEC. After nine months had gone with no reaction, from Coinbase’s point of view, a fair period of time had elapsed after all.
A month ago, the SEC issued a warning to Coinbase, indicating that it intended to sue the exchange on charges that it had listed and offered unregistered securities products. It is anticipated that Coinbase would reply to the particular claims before the end of the month of April. The document that Coinbase submitted on Monday, however, is a proactive step that the company is taking to argue that the approach used by the SEC does not give enough regulatory guidance for U.S. firms who are active in the cryptocurrency market.
