SEC lawyers say ‘Coinbase is not entitled’ to lawsuit response

The SEC will not be rushed.

That was the upshot of a closely watched court proceeding Tuesday as the agency rebuffed an attempt by Coinbase to disclose whether it plans to write new rules for crypto.

In filings with a federal appeals court, the SEC’s lawyers argued that Coinbase doesn’t have the right to push the regulator to write laws, and that it would take its time to respond to the company’s demands.

“Coinbase is not entitled to mandamus imposing a deadline on the commission’s consideration of Coinbase’s rulemaking petition,” they said, using a technical term for a judicial remedy.

Special rules

Tuesday’s action was the latest skirmish in the legal war between the listed exchange and the top financial markets regulator in the US. In April, Coinbase sued the SEC in an effort to get clarity on whether it could create special rules for the crypto industry.

Convinced the agency was preparing to sue it for violating securities laws, Coinbase wanted to establish its argument that digital assets, thanks to blockchain technology, need their own tailor-made rules. Moreover, Coinbase contended the SEC has the power to write those rules,if only it would choose to do so.

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Under Chair Gary Gensler, the SEC has rejected that argument time and again. Last week, the agency accused Coinbase of running an illegal exchange, broker-dealer, and clearing firm by failing to properly register those businesses.

The clash between the SEC and Coinbase is shaping up to be an existential struggle for the future of the US crypto industry.

CEO Brian Armstrong has been urging supporters to adopt a crypto shield as a symbol of their crusade, and back in April shared how to mint an NFT with the symbol.

On one side, Coinbase casts itself as crypto’s champion. CEO Brian Armstrong has been urging supporters to adopt a crypto shield as a symbol of their crusade, and back in April shared how to mint an NFT with the symbol.

Yet detractors say this approach is little more than a PR stunt. John Reed Stark, the former head of the SEC’s Internet Enforcement Division, called Coinbase’s petition to force rulemaking “a desperate deflection and noxious red herring.”

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Now the focus has turned to a pair of draft pieces of legislation in the House of Representatives that may provide relief to the embattled crypto industry.

Meanwhile, Coinbase is rallying industry leaders and members of Congress to put pressure on Gensler and the SEC to clarify the rules of the road for crypto.

Extraordinary request

On June 6, a judge ordered the SEC to answer some questions about how it meant to approach the rulemaking petition and when, and gave it a week to file that response.

Late Tuesday night, the SEC said there is “no merit to Coinbase’s extraordinary request” in its filing.

The regulator’s lawyers said the commission has not decided whether to deny Coinbase’s petition and the agency will respond by October 11.

Have a tip about crypto regulatory matters? Contact the author at joanna@dlnews.com.