Coinbase Goes Offensive Against The SEC With Lawsuit Targeted At Regulatory Clarity

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• Coinbase has asked a federal court to compel the Securities and Exchange Commission to respond to a petition against the body seeking regulatory clarity. 
• The Chief Legal Officer of Coinbase noted that the actions of the SEC show that the commission is set to continue with its aggressive approach to regulation. 
• Pundits and legal experts around the digital asset space have hailed the petition as a step in the right direction as “the best form of defense is attack.” 

The Securities and Exchange Commission (SEC) regulatory approach has come under fire by crypto executives and commentators in recent months after the commission filed actions against firms without clear-cut regulations.

Coinbase has filed a suit against the SEC demanding a response from the commission over a petition filed in July 2022. The petition sought clarity on whether digital assets would be treated in line with the current framework for traditional assets. 

“…propose and adopt rules to govern the regulation of securities that are offered and traded via digitally native methods,” a section of tthe petition reads. 

The latest move by the American exchange giant comes after the chairman of the SEC, Gary Gensler, insisted during a Committee hearing in Congress that there are rules in place to regulate digital assets, with the Commission requiring more funds and manpower. 

Paul Grewal, the Chief Legal Officer at Coinbase, stated that the actions of the SEC show that it plans to deny the petition but it should do so to the public.

“From the SEC’s public statements and enforcement activity in the crypto industry, it seems like the SEC has already made up its mind to deny our petition. But they haven’t told the public yet. So the action Coinbase filed today simply asks the court to ask the SEC to share its decision,” he said. 

Attack is the last card on the table

The action filed by Coinbase is the first formal swipe against the SEC after it was served with a Wells Notice with growing concerns over litigation with the commission. In recent months, the SEC has mounted pressure on exchanges and digital asset firms in its regulatory enforcement strategy.

Kraken came under the SEC’s radar and subsequently agreed to cease its staking operation in the US in part of a $30 million settlement. Despite these cases, digital asset firms mull over the lack of clarity in regulation in the US. 

“Coinbase does not take any litigation lightly, especially when it relates to one of our regulators. Regulatory clarity is overdue for our industry,” Grewal added. 

Digital asset lawyer Jeremy Hogan is among commentators who hailed the move by Coinbase as a positive step adding that “the best defense is a good offense.”