The US Court of Appeals for the Third Circuit interrupted the US Securities and Exchange Commission’s (SEC) enforcement on the world’s largest centralized cryptocurrency exchange platforms when it gave the regulator an ultimatum of seven days to respond to the rulemaking petition by Coinbase.
Judge Cheryl Ann Krause issued a short order in Coinbase’s Writ of Mandamus petition, ordering the US SEC to disclose if it has decided on the exchange’s rulemaking petition and if it hasn’t yet, asked how much time it needs to determine whether it will grant or deny the said petition.
The court gave the financial watchdog seven days to “submit a letter in response to the order and address the issues highlighted by the Third Circuit court,” adding that while Coinbase is not required to file a response, it can do so within five days following the regulator’s filing.
Moreover, the court demands that the SEC should explain why the court should not keep overseeing the case and why the financial regulator should not issue Coinbase with updates on rulemaking.
“We appreciate the Third Circuit’s careful attention to this issue. Some may dismiss this as a small or obscure request that we’ve made to the court. But it matters not just to our industry – this is core to the proper working of government agencies and the way they engage with the public,” Coinbase chief legal counsel Paul Grewal said in a Tweet on Wednesday.
“We continue to believe that rules of the road, from legislation or rulemaking or both, must come before enforcement actions. That is why we petitioned the SEC for rulemaking nearly a year ago in the first place,” he said, adding: “If the SEC’s answer to our petition for rulemaking is ‘no,’ then they are required by law to tell us, because we have the legal right to question that ‘no’ in court. And there are serious questions to be asked.”
It may be recalled that Coinbase filed an Administrative Procedure Act challenge requesting the court to force the SEC to respond to the crypto company’s petition in July 2022 for formal rulemaking in the cryptocurrency industry, noting that the existing rules are not suited for digital assets.
In April, Coinbase confirmed that it has received a Wells Notice from the SEC, which is a formal notice from the regulator informing the company that it is planning to bring enforcement actions against it.
On Tuesday, just a day after the financial regulator filed 13 charges against Binance, it sued Coinbase for allegedly violating the country’s securities law.