Leading cryptocurrency exchange Coinbase secures a legal victory against the U.S. SEC regarding its 2022 petition for crypto-specific rulemaking.
The U.S. Court of Appeals for the Third Circuit issued its opinion in the Coinbase v. SEC lawsuit yesterday, rebuking the regulator for denying the exchange’s petition for rulemaking.
Paul Grewal, Coinbase’s Chief Legal Officer (CLO), took to X to celebrate the exchange’s victory over the SEC, noting: “We just won our petition for a writ of mandamus at the Third Circuit.”
Coinbase Rulemaking Petition
In 2022, Coinbase asked the SEC to establish clear rules for securities offered and traded using digitally native methods. The exchange also sought clarity from the SEC to determine which crypto assets constitute securities.
The SEC denied Coinbase’s request in 2023 instead of providing the desired response. Consequently, Coinbase initiated an appeal at the Third Circuit to compel the SEC to implement rulemaking for crypto assets.
Court Grants Coinbase Petition in Part
Per the recent statement, the Third Circuit granted Coinbase’s petition in part. However, the court declined to order the SEC to implement crypto-specific rulemaking as Coinbase had requested.
Judge Thomas Ambro stated that the SEC’s denial of Coinbase’s rulemaking petition was insufficiently reasoned, and the opinion was issued without supporting evidence.
Additionally, Judge Stephanos Bibas ordered the SEC to provide a full explanation for its denial of the petition. The judge cautioned the SEC against offering another “poor explanation,” as seen in previous cases.
Furthermore, Judge Bibas criticized the SEC for focusing on enforcing outdated rules against crypto companies that seek to comply with the law, rather than addressing fraud within the sector.
Difference Between Coinbase Rulemaking Petition and SEC Enforcement Action
For clarity, this case differs from an enforcement action the SEC introduced against Coinbase in 2023. In that case, the SEC alleged that Coinbase broke the law by operating as an unregistered securities exchange.
Last week, a federal court approved Coinbase’s request to pursue an interlocutory appeal against the SEC in the Second Circuit. Consequently, Judge Katherine Polk Failla paused all legal proceedings in the case at the district court level, pending its resolution at the appeal court.
In the meantime, the SEC is edging closer to an administration change, with its current chairman, Gary Gensler, resigning on January 20. Notably, Paul Atkins will replace him as the next chair. Crypto proponents expect Atkins’ leadership to end the commission’s enforcement actions against the industry.