Coinbase challenges SEC’s rejection of digital asset rulemaking petition

Coinbase’s chief legal officer, Paul Grewal, has criticized the U.S. Securities and Exchange Commission (SEC) for its minimalistic legal response regarding the exchange’s request for clearer cryptocurrency regulations.

In a Jan. 30 X post, Grewal highlighted the inadequacy of the SEC’s documentation, which formed the basis of its decision to reject Coinbase’s petition for digital asset rulemaking.

Below is the administrative record of @SECGov's decision rejecting our petition for digital assets rules. See for yourself whether it's even close to complete or sufficient to justify their decision. Our brief is due 3/11; the SEC brief is due 4/10, and our reply is due 5/1. 1/3

— paulgrewal.eth (@iampaulgrewal) January 30, 2024

The saga began in June 2022 when Coinbase submitted a petition urging the SEC to establish more transparent rules for the burgeoning crypto industry. However, the SEC dismissed this request in December 2023, maintaining that the current securities regulations for cryptocurrencies were adequate.

The heart of the contention lies in the SEC’s latest filing, dated Jan. 24, 2024. The document, a compilation of records leading up to the December decision, primarily consists of external comments and records of meetings between the SEC and Coinbase. Notably, these documents do not articulate the SEC’s reasoning behind its decision, presenting a lack of comprehensive explanation from the commission in its recent filing.

The only substantial insights into the SEC’s position are gleaned from its initial acknowledgment of Coinbase’s petition and the final letter of rejection, both included in the January filing.

Following the SEC’s December rejection of Coinbase’s rulemaking petition, Coinbase has subsequently requested a court review of this decision.

Grewal outlined the timeline for the forthcoming legal proceedings in his post, noting key dates: Coinbase’s brief is due on Mar. 11, the SEC’s response by Apr. 10, followed by Coinbase’s rejoinder on May 1. He added that Coinbase “appreciate[s] the Third Circuit’s consideration.”

This legal tussle is set against the backdrop of the SEC’s June 2023 charges against Coinbase, accusing the exchange of trading 13 unregistered securities. While these cases are distinct, Coinbase has referenced them in conjunction, pointing out its proactive efforts in seeking clarity through its rulemaking petition, only to be met with legal threats.

The resolution of the rulemaking petition remains uncertain, but its outcome could significantly impact future SEC actions against Coinbase and other crypto firms, potentially shaping the regulatory space for digital assets.