Coinspeaker
US Court Supports Coinbase’s Request, Requires SEC to Justify Denial of Regulations
The US Court of Appeals for the Third Circuit has instructed the US SEC to justify its rejection of Coinbase’s appeal for specific regulations pertaining to cryptocurrencies, stating that the reasons provided were insufficient.
Coinbase Receives Court Support Amid Ongoing Conflict with the SEC
The legal dispute between the US Securities and Exchange Commission and the cryptocurrency exchange Coinbase began several months ago due to alleged breaches of securities laws.
In this ongoing conflict, Coinbase has pushed back against the regulator, claiming that the SEC’s oversight in the matter is inadequate. Seeking greater clarity, Coinbase has urged the SEC to establish crypto-specific regulations that clarify how federal securities laws apply to the cryptocurrency sector and when such regulations should govern digital assets.
However, the SEC’s refusal to approve Coinbase’s request for these rules prompted the court’s involvement.
Court Calls for Greater Transparency from SEC
On January 13, the judge issued rulings that granted part of Coinbase’s request, specifically asking the SEC to clarify its reasoning behind the rejection of Coinbase’s petition for crypto-specific rules.
While the SEC provided a brief two-page letter rejecting the request, the court determined that this response lacked clarity and deemed the SEC’s vague explanation of its regulatory approach as “arbitrary and capricious.”
Despite some anticipation, the court has not yet mandated the SEC to create new regulations as requested by Coinbase, leaving it uncertain whether the cryptocurrency sector will soon receive clearer guidelines on how digital assets should be evaluated as securities.
In his ruling, Judge Thomas L. Ambro stated, “We are remanding this back to the SEC to offer a coherent explanation; it should avoid providing yet another inadequate justification in a series of them.”
While the court made additional remarks, reinforcing Coinbase’s concerns regarding the SEC’s stringent actions towards the crypto community, it highlighted that existing regulations do not adequately align with the innovative framework introduced by cryptocurrency technology. The court noted that the SEC’s enforcement actions raise “constitutional notice concerns.”
