June 5, 2024
Coinbase Urges SEC to Swiftly Define Digital Assets as Securities
Policy & Regulation

Coinbase Urges SEC to Swiftly Define Digital Assets as Securities

Coinbase is requesting again that the Securities and Exchange Commission move quickly on a request it made last year for formal regulations on whether digital assets constitute as securities, dismissing the most recent answer from the agency to its long-delayed petition on rulemaking.

The exchange wants the courts to order the SEC to act if it won’t do that.

In a document filed with a federal court in Manhattan on Friday, Coinbase charged the SEC with a habit of “troubling intransigence” for not acting on a rulemaking petition it filed in July. In a recent brief, the agency’s attorneys said that although a suggestion was made in this direction, no advice had yet been released. The agency had previously requested a judicial stay, which was granted in June.

According to Eugene Scalia, outside counsel for Coinbase, this pattern amounts to a covert admission by the SEC that it “has no intention” of acting on the request. Because the SEC did nothing, Scalia claimed that digital assets are now “stuck in an unprecedented Catch-22.”

“The SEC’s unilluminating report is mere bureaucratic pantomime and confirms that nothing short of mandamus will prompt the agency to take its obligations seriously,” wrote Scalia, a partner at Gibson Dunn and the son of late Supreme Court Justice Antonin Scalia.

A mandamus is a judicial writ issued by a higher court directing a subordinate court to carry out its mandate.

The initial Coinbase filing was a rulemaking petition, asking the SEC to specify how businesses can adhere to federal securities laws. On June 6, over a year after Coinbase was accused of operating an unregistered securities exchange, the SEC filed a lawsuit against the company. The Third Circuit of the U.S. Court of Appeals required the agency to disclose whether it had chosen to reject Coinbase’s petition as a result of this litigation.

The chairman of the SEC, Gary Gensler, has frequently asserted that current regulations already make it plain how digital asset businesses must abide by the law and has accused them of disobeying the rules.

The SEC claimed in its filing from October 11 that its staff had made a suggestion for action regarding the request, but Scalia said that this was an intentionally weak answer.

“The agency cannot hide behind opaque allusions to unspecified internal advice offered by its staff,” stated Scalia, adding that this response was the “latest gambit to stave off judicial review of its de facto denial.”

As evidence that the SEC rejected the petition, Scalia said that the SEC’s Division of Corporate Finance requested that Coinbase CEO Brian Armstrong remove a statement that there is “no certainty” surrounding rules of digital assets and that the law is “well-established.” This, Scalia concluded, was in opposition to Armstrong’s request for the addition of the clause in a letter sent in December 2020.

Scalia argued that if the SEC has a suggestion about the rulemaking petition right now, the court should order the SEC to make it public within 30 days.

“The Commission has resolved not to conduct the rulemaking Coinbase requested. The Commission’s staff have now acted; the Commission is readier than ever to do so.” Concluded Scalia.

Image: Flickr

Disclosure Statement: Miami Crypto does not take any external funding, or support to bring crypto news to the readers. We do not have any conflicts of interest while writing news stories on Miami Crypto.

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