The growing saga between the United States Securities and Exchange Commission (SEC) and Coinbase, one of the biggest players in the cryptocurrency market, is moving into its next chapter. This past week has brought an important development as the US Court of Appeals is asking the SEC to provide clarity on a petition filed by Coinbase within seven days.
Last month, Coinbase petitioned the SEC seeking a formal regulatory process to provide guidance to the cryptocurrency industry. However, the SEC’s lack of response led Coinbase to file a lawsuit against the regulatory agency in April of this year.
In the petition, Coinbase argued that the SEC had already, in essence, denied the request, although it has not publicly stated this. Now the court is demanding an official response. This marks a significant shift in the relationship between cryptocurrency exchanges and the SEC, as the latter have been fighting for regulatory clarity for some time.
The SEC, for its part, argued in a previous response that it has no obligation to issue new regulations for the sector. Furthermore, the agency stated that Coinbase has no standing to sue it. In response to this, Coinbase expressed concern that the lack of regulatory clarity is affecting the development of the cryptocurrency market.
At the same time, the SEC initiated legal action against Coinbase, accusing the exchange of selling unlicensed securities and operating as an unregistered exchange. The SEC also alleged that Coinbase was violating several other securities market rules.
Coinbase Chief Legal Officer Paul Grewal reacted to the action on Twitter, stating that regulatory rules should come before enforcement actions. Grewal also said that Coinbase has been asking the SEC to create rules for nearly a year.
Earlier tonight the Third Circuit issued a short order in Coinbase's mandamus action today. The court noted the SEC's suit against us this morning and asked the SEC whether that means the SEC has decided to deny our pending petition for rulemaking. The SEC has 7 days to respond. pic.twitter.com/8QXXoHJ07Z
— paulgrewal.eth (@iampaulgrewal) June 7, 2023
The court is now asking the SEC to respond to those points within seven days. The future of cryptocurrency regulation in the United States may very well depend on how the SEC responds to this summons.
