SEC to Coinbase: No need for new crypto regulation, enforcement actions will continue
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(Kitco News) - The U.S. Securities and Exchange Commission (SEC) has responded to Coinbase’s petition for mandamus, saying new regulation is unnecessary and asking the court to reject the petition.
Mandamus is a legal term that refers to a type of court order. It is often sought when an individual or organization believes that a government agency failed to fulfill a legal duty or has acted unlawfully or unreasonably.
Coinbase’s April 24 petition for mandamus argued that the securities regulator is legally obligated to share the information they requested in 2022, and asked the court to compel the SEC to do so.
In documents filed with the court on May 15, the SEC stated that the court should not grant Coinbase’s petition for mandamus, and that the SEC is not obligated to fulfill the demands Coinbase outlined in its 2022 petition.
The original petition, which was filed by Coinbase in July 2022, sought to have the SEC propose and adopt a clear regulatory framework for the cryptocurrency industry in the U.S. and establish guidelines for companies like Coinbase to work from as they build out their businesses.
The petition included 50 questions that covered a wide range of topics related to the regulatory treatment of certain digital assets. Of specific interest for Coinbase, as well as numerous other players in the ecosystem, is the question asking the SEC to provide clarification about its process of determining the classification of a token as a security or a commodity.
“Mandamus is an extraordinary remedy—one that requires the petitioner to show a clear and indisputable right to relief,” the SEC said in their reply. “Coinbase does not and cannot demonstrate such a right.” The SEC argued that no applicable laws or regulations impose “an obligation to issue the broad new regulations regarding ‘digital assets’ Coinbase has requested,” nor are they required to do so on a specific timeline.
The SEC claimed that granting the petition for mandamus would compel them “to replace existing applicable securities laws and regulations with a comprehensive new regulatory regime for the trading of crypto assets that are securities” in short order. The agency argued that even according to Coinbase’s own submissions, “considering the various paths it suggests is a necessarily complicated endeavor” and the process of formulating and approving a new regulatory regime could take years.
The SEC also said that they have every right to continue their enforcement actions based on securities regulations already on the books. “Agencies routinely enforce existing rules while considering further amendments to regulatory requirements,” they wrote. “Coinbase’s preference for faster or different regulatory action by the Commission does not entitle it to extraordinary relief from this Court. The petition should be denied.”
Paul Grewal, Coinbase’s Chief Legal Officer, replied to the SEC filing in a Twitter thread, saying “the SEC told the court that rulemaking may take years and they're in no rush,” and that the agency “acknowledged that it will continue to use enforcement actions as a substitute for rulemaking for the foreseeable future.”
Coinbase filed the petition for mandamus on April 24, and on May 3, the Third Circuit Court of Appeals said that the SEC must file its response within 10 days, providing a legal basis for why it has not responded to the 2022 petition.
In the filing, the exchange said the commission “at a minimum must set forth how those inapt and inapposite requirements are to be adapted to digital assets.”
Coinbase now has seven days to file a response to the SEC’s May 15 filing.