Coinbase, a publicly listed American company that operates a cryptocurrency exchange platform, scored a major win when the court approved its writ of mandamus petition and ordered the U.S. Securities and Exchange Commission (SEC) to respond in 10 days to the crypto company’s complaint on how it applies securities laws to digital or crypto assets.
The ongoing crackdown by various financial regulators and watchdogs, especially the SEC, in the U.S. on the nascent cryptocurrency industry has disappointed the crypto community and propelled businesses to request regulatory clarity and entertain the idea of conducting their operations offshore.
But, while the SEC sued various crypto businesses and sent Wells Notice to others, Coinbase stood its ground and attempted to fight the regulator before the court.
Last week, Coinbase took the SEC to court and demanded a response to a request it filed in July 2022, asking the agency to have clear regulations on which digital assets are classified as securities and how the country’s securities law would apply to cryptocurrency.
The SEC failed to respond to Coinbase’s request, which allowed the crypto company to take legal action against it through the writ of mandamus.
“It is unreasonable for the SEC — an agency with over 4,500 employees — to take nine months (and counting) to complete that simple task,” the crypto company said in an April 24 federal court filing.
Coinbase also argued that the agency is providing insufficient regulatory guidance for companies operating in the U.S. cryptocurrency industry, noting that the regulator should “at a minimum must set forth how those inapt and inapposite requirements are to be adapted to digital assets.”
Today, we filed a narrow action in the U.S. Circuit Court to compel the SEC to respond “yes or no” to a rulemaking petition we filed with them last July asking them to provide regulatory guidance for the crypto industry. 1/4 https://t.co/rlsS1DIFfl
— paulgrewal.eth (@iampaulgrewal) April 25, 2023
On Wednesday, the Third Circuit Court of Appeals ordered the financial regulator to respond to Coinbase’s request within 10 days, after which, Coinbase can file a response within seven days.
“[SEC] is ordered to file an answer to the petition for writ of mandamus within 10 days of the date of this order,” a text-only order — an electronic case docket entry with no attachment — issued Wednesday, read.
The SEC has not yet issued any statement related to the recent court order.
“We appreciate the Court’s careful consideration of this matter,” Coinbase chief legal counsel Paul Grewal said in a tweet.
The Third Circuit just issued a text-only order directing the SEC to file a response to our mandamus petition within 10 days (and gave us 7 days for a reply). Here’s the text of the order:
TEXT ONLY ORDER (Clerk) At the direction of the Court, Respondent is ordered to file an…
— paulgrewal.eth (@iampaulgrewal) May 3, 2023
The request for regulatory clarity is one of the major issues raised by crypto companies to the SEC. But despite multiple appeals, the financial watchdog failed to provide regulatory guidance on how it classifies digital assets as securities.
In his previous statements, SEC chairman Gary Gensler mentioned that “everything else other than bitcoin is a security” but the agency has not set out this position in regulations.
