Coinbase filed a lawsuit against the Securities and Exchange Commission in a federal appeals court in Philadelphia on Monday. Coinbase has requested that a judge order the SEC to react to its July 2022 petition for clearer crypto regulating standards. According to the corporation, the regulatory authority has not been reasonable or timely in responding.
The exchange requested the SEC in July of last year to create regulations outlining how securities laws apply to digital currency. Requests on how to engage in a formal notice-and-comment process to allow the public to weigh in were also made. The crypto sector has made these demands several times. Last month, the largest crypto exchange also filed a statement with the SEC. It requests greater clarity on the SEC’s stance on staking services.
This was informed in a blog by the Chief Legal Officer of Coinbase, Paul Grewal. “Coinbase does not take any litigation lightly, especially when it relates to one of our regulators. Regulatory clarity is overdue for our industry. Yet Coinbase and other crypto companies are facing potential regulatory enforcement actions from the SEC, even though we have not been told how the SEC believes the law applies to our business. “
According to the lawsuit, “the SEC refuses to address Coinbase’s rulemaking petition”. This comes as the regulatory body declares that it intends to start enforcement proceedings against Coinbase for listing purportedly unregistered securities. The crackdown against the crypto industry began after the FTX collapse in 2022.
One of the main ways of implementing this crackdown is through Wells Notice. The SEC has sent the notice to many crypto and crypto-friendly firms for the last year. These firms include Platypus, Kraken and even Coinbase. Coinbase received the notice on March 22, 2023. This issue led to a war between the exchange and the regulatory body.
Due to the harsh treatment of crypto firms in the United States, many firms are planning on moving to a more friendly country. Coinbase CEO Brian Armstrong confirmed this during the Innovate Finance Global Summit last week. “Anything is on the table, including relocating or whatever is necessary.”
This is not the first time Coinbase has warned the SEC of driving away the industry. In an interview for Bloomberg, Armstrong said, “What I believe should happen in the United States is that we need a clear rulebook so that this industry can be built here. We don’t want it to be like 5G or semiconductors that went offshore. It’s actually a matter of national security we get the future of the financial system built here inside the United States.”
Coinbase is not alone in this fight. They are being backed by multiple other firms and even lawmakers. Not only that but the lack of clarity in crypto legislation has been brought to the attention of lawmakers on a number of occasions. Because the two primary regulators, the SEC and the Commodity Futures Trading Commission (CFTC), have been in continual conflict. The CFTC chiefs have asked Congress to interfere in the process to make it simpler.