Blockchain News

Why did Coinbase Sue the SEC?

Coinbase claims that the agency failed to respond adequately or promptly as required by the Administrative Procedure Act.

SEC's inaction prompts Coinbase

Coinbase sued the Securities and Exchange Commission on April 24 for failing to publicly share its response to a months-old petition regarding regulating the crypto industry using existing SEC guidelines.

The petition requested that the SEC adopt rules governing the regulation of digital assets like cryptocurrencies that are traded and offered via digital systems. But, according to the company, the agency failed to respond adequately or promptly in a lawsuit filed with a federal court in Philadelphia.

As reported, the Administrative Procedure Act ("the APA") requires the SEC to respond to Coinbase's rulemaking petition "within a reasonable period of time."

In response to Coinbase's petition, the SEC did not respond publicly but has aggressively increased enforcement actions against crypto exchanges, including Coinbase.

Since January, the SEC enforcement actions have targeted Bittrex and Gemini and crypto lender, Genesis. Additionally, the agency has taken action against individuals accused of manipulating crypto assets, such as crypto entrepreneur Justin Sun and Terraform Labs founder Do Kwon.

“Regulatory clarity is overdue for our industry. Yet Coinbase and other crypto companies are facing potential regulatory enforcement actions from the SEC, even though we have not been told how the SEC believes the law applies to our business,” Coinbase chief legal officer Paul Grewal said in a recent statement.

According to Grewal, based on SEC public statements and enforcement actions in the crypto industry, the regulator has already decided to deny Coinbase's petition but hasn't informed the public.

Coinbase and the SEC: A Long-standing Rivalry

In the recent move, Coinbase is launching a lawsuit against the regulatory body a month after being warned by the SEC of pending legal action.

The SEC threatened to sue Coinbase last month over some of its products. 

Before that, the SEC threatened to sue Coinbase over its Lend product with a Well’s notice. As per the SEC, Coinbase's Lend program does not qualify as a security - or, more specifically, it is not an investment contract or a note. 

Worth noting, Coinbase has faced challenges over the years due to legal uncertainties and couldn't develop and roll out new products when its rivals scaled up internationally.

Recently, the Chief Executive Officer of Coinbase, Brian Armstrong, has said the exchange may move its headquarters outside the United States unless U.S. regulations change. Additionally, the US-based cryptocurrency exchange has recently received regulatory approval to operate in Bermuda and is reportedly set to launch a derivatives exchange there.

What is Coinbase?

Coinbase is one of the oldest cryptocurrency exchanges in the world. The exchange was founded by Brian Armstrong and Fred Eshram back in 2012. While Armstrong remains at the helm of the exchange as the CEO, Eshram left the company in 2017 but still owns 6% of the equity and serves on the board of directors. Coinbase (COIN) became the first cryptocurrency firm and exchange to trade on Nasdaq starting on April 14, 2021. The stock has even briefly surpassed a market capitalization of $100 billion, although its market cap is just over $15 billion at the time of writing.

Find more about Coinbase here:

Website | Twitter | Blog |

Related News