SEC stands firm, rejects Coinbase’s rulemaking proposal

Coinbase is at a heightened point of conflict with the Securities and Exchange Commission (SEC) as it battles over the framework of regulations governing cryptocurrency. More recently, the SEC confirmed this position when it rejected Coinbase’s application for rulemaking, and there is evidently an escalating controversy between them.

Coinbase presses SEC for crypto regulation changes

Coinbase asserts that the current level of regulation needs to be changed to create a platform more suitable for the issuance of digital assets. In its argument that the existing rules are too unwieldy, Coinbase has had to deal with the continuing opposition of the SEC. For its sake, the SEC re-confirmed its position that the current regulatory regime represents a good balance between investor protection and market integrity and serves the objectives of facilitating capital formation. This decision came only a few weeks after the SEC opposed the interlocutory appeal by Coinbase, bringing more battles on the long-standing disagreement.

While Coinbase put forth its best shot at affecting the regulatory rethinking, the SEC’s latest filings maintain that crypto assets and the existing securities laws, which have served over the years, are still perfectly suitable. Among the points, the agency focused on the courts’ practice of applying the laws to crypto securities according to the same consistent regulatory principles. The SEC additionally pointed to the fact that its listed upcoming regulatory initiatives and other praised priorities were grounds for dismissing Coinbase’s proposal in rulemaking.

Coinbase challenges SEC over crypto regulations

Coinbase’s central argument rests with the belief that it has no fair notice at present under the existing regulatory framework. The SEC’s enforcement actions reflect a new tack by the Regulator with regard to crypto securities. Coinbase says that this shift is the reason why clearer regulations are needed for stability.

Accordingly, the SEC denies this argument, claiming that the rulemaking and enforcement proceedings are different ones and that its authority for the latter has been the same as before. The SEC’s reasons and decision to deny amending its regulatory approach as a response to Coinbase’s request were supported by referring to the Administrative Procedure Act; that is, the current approach put in place by the agency is sufficient, and no change is needed for now.

Objecting along this line of reasoning, Coinbase’s Chief Legal Officer, Paul Grewal, believes that the SEC’s policy is unfair and inconsistent. Specifically, the SEC is antagonistic toward Coinbase’s motion to challenge the lawsuit. The appeal is based on the appellate court finding the 1946 ruling of the U.S. Supreme Court case usually relied on the SEC. Grewal highlighted the SEC’s contradictory decisions in other similar fights, such as the protracted Ripple Labs lawsuit.