Coinbase, the largest cryptocurrency exchange in the United States, clashed with the U.S. Securities and Exchange Commission (SEC) in a federal appeals court in Philadelphia on Monday. The exchange is pressing the SEC to develop new rules governing digital assets, following a lawsuit it filed last year aimed at compelling the agency to respond to a petition submitted in 2022.
In its petition, Coinbase called on the SEC to clarify the criteria determining when a digital asset qualifies as a security and to establish a new regulatory framework compatible with cryptocurrencies. However, the SEC denied this request in December 2023, arguing that current regulations are adequate for the crypto industry.
During the court proceedings, Coinbase’s attorney, Eugene Scalia, contended that the SEC’s refusal to engage further on the registration process has left the exchange unable to operate within the bounds of U.S. regulations. He characterized the SEC’s actions as arbitrary and capricious, emphasizing the need for clearer guidelines.
Conversely, SEC attorney Ezekiel Hill defended the agency’s position, asserting that there is no obligation to create new rules for the cryptocurrency sector. He stated that existing regulations should suffice, adding, “If Coinbase wants to arrange its business in a way that does not comply with the existing regulatory framework, that does not establish a right to have the framework adapted to meet their business.”
The three-judge panel acknowledged the SEC’s discretion in prioritizing its rulemaking efforts but questioned why cryptocurrency regulation has not been given more attention. This legal battle highlights the ongoing struggle between the cryptocurrency industry and the SEC, which maintains that most crypto tokens qualify as securities and fall under its jurisdiction.
The SEC has initiated legal action against several cryptocurrency firms, including Coinbase, alleging that they have improperly listed and traded tokens that should have been registered as securities. Coinbase continues to dispute these claims in a separate court case.
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