The US Court of Appeals criticized the SEC’s decision to deny Coinbase’s rulemaking petition on crypto regulations due to its vagueness.
The US Court of Appeals for the Third Circuit condemned the US Securities and Exchange Commission (SEC) for its heartless denial of Coinbase’s rulemaking petition.
It represents a progression from a 2022 case in which Coinbase requested that the securities regulator suggest and implement regulations for cryptocurrency governance, which included a clarification of which crypto assets qualify as securities.
Coinbase asked the court to force the securities regulator to respond to the petition after the SEC denied in late 2023. The regulator’s two-page denial was “insufficient and capricious” in light of the exchange’s arguments, as it unjustly burdened crypto companies with regulatory enforcement.
Eugene Scalia, Coinbase’s counsel, informed the panel that the Commission did not provide any explanation for rejecting Coinbase’s demonstration that the current SEC rules render it impossible for digital asset companies to register with the SEC and for digital assets to function as intended.
The D.C. Third Circuit panel concurred on Monday, necessitating that the SEC provide an explanation for its denial of Coinbase’s request. The court concluded that the denial only offered a limited rationale. Judge Thomas Ambro specifically observed that the SEC was not required to provide a detailed explanation for its decision to reject the petition for crypto rulemaking; however, it was required to provide a tangible response.
“There is an argument that this is dangerously near to being vacuous. I fail to comprehend the rationale behind your refusal to permit rulemaking, despite the fact that I am aware that you are not required to provide a significant amount of information. A report from Law360 quoted Judge Ambro as saying, It is a concise reasoning, but I do not see the reasoning.”
Furthermore, Judge Ambro expressed his concern regarding the absence of clear guidance for the crypto industry, as it places firms in a regulatory grey area while they are under continual pressure to comply. The remarks of Ambro were echoed by Judge Stephanos Bibas, another panel member, who emphasised the absence of clarity.
Thus, it is not that the agency is uninterested in the region. It is solely concerned with correcting errors without providing more advanced advice.
CLO of Coinbase In a post on X, Paul Grewal reiterated the court’s statement. He criticized the SEC for its failure to provide a reasonable explanation for its “barebones denial” and for continuing to use its authority to engage in an arbitrary enforcement campaign against the crypto industry.
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