Coinbase challenges SEC’s denial of new crypto rules

Coinbase has filed a petition in a federal appeals court to review the U.S. Securities and Exchange Commission’s decision denying the crypto exchange’s request for new rules in the digital asset sector.

Coinbase argues that the SEC’s denial was arbitrary and capricious, an abuse of discretion, and contrary to law, violating the Administrative Procedure Act. The exchange also contends that the agency’s refusal to engage in rulemaking, coupled with enforcement actions, exceeds its statutory authority and goes against fundamental fairness principles.

The SEC, meanwhile, responded by criticizing Coinbase’s petition for lacking substance and disagreed with claims about existing regulations being unworkable, drawing criticism from the crypto community.

“I was pleased to support the Commission’s decision for three reasons. First, existing laws and regulations apply to the crypto securities markets. Second, the SEC addresses the crypto securities markets through rulemaking as well. Third, it is important to maintain Commission discretion in setting its own rulemaking priorities,” said SEC Chair Gary Gensler in his statement shortly after the official denial.

Earlier in May, Coinbase secured support from the Court of Appeals for the Third Circuit, compelling the SEC to make a decision on the exchange’s petition that was first filed in July 2022. Despite initial objections, the agency complied and issued its ruling today, following its legal action against Coinbase in June.

The company’s shares experienced a 4 percent drop in afternoon trading to $147.82 in the wake of the ruling. Still, the figure is more than double its value at the beginning of the year, indicating the cryptocurrency market’s positive turn after a challenging 2022.

The SEC’s refusal to grant Coinbase a broker-dealer license has also faced disagreement from two of its Republican commissioners, Hester Peirce and Mark Uyeda, who advocated for dialogue and regulatory guidance.

“In our view, the petition raises issues presented by new technologies and other innovations, and addressing these important issues is a core part of being a responsible regulator,” the commissioners said in a joint statement.

The commissioners also said that the exploration of these matters should involve obtaining public input through methods such as concept releases, public roundtables and requests for comment.

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