Major crypto exchange Coinbase has filed a lawsuit against the US SEC and Exchange Commission (SEC) that would compel the regulator to provide an answer to a previous petition by the company.
The SEC has adopted a more stringent approach towards the crypto industry in recent times, believing most firms are breaking securities laws without providing clear regulatory policies.
Coinbase has filed a writ of mandamus — a court order that directs a lower court, government, or public official to fulfill their obligation under the law — against the SEC in the US Court of Appeals for the Third Circuit on April 24, 2023, asking the agency to respond to its pending rulemaking petition filed in July 2022.
The crypto exchange, in the summer of 2022, asked the SEC to “propose and adopt rules to govern the regulation of securities that are offered and traded via digitally native methods, including potential rules to identify which digital assets are securities.”
Several months later, the American regulatory watchdog is yet to respond to Coinbase’s petition, with the latest lawsuit stating that the SEC has “unreasonably delayed” in taking an action.
In a blog post by Coinbase Chief Legal Officer Paul Grewal, the securities regulator could deny the company’s rulemaking petition, judging by the SEC’s latest enforcement action and statement. However, the crypto exchange wants the Commission to make its decision public.
Coinbase earlier received a Wells notice from the SEC, which stated that the firm may have violated securities laws. While the crypto exchange has maintained that it has not broken any law, it said it is prepared to go to court with the SEC.
Meanwhile, Coinbase said the company could leave the US if there are no robust regulatory policies in place. The firm recently got a Bermuda license and also has its sights on the United Kingdom.
Coinbase also noted that the SEC, chaired by Gary Gensler, has been carrying out enforcement actions against crypto companies rather than providing regulatory clarity. The firm’s CEO, Brian Armstrong, recently said the agency’s war-like approach has caused “untold harm” to the United States.
Gensler’s crackdown on the crypto sector also led US Representative Warren Davidson to announce plans to introduce new legislation that would remove the SEC boss from his position. According to Davidson, the removal of Gensler will correct a “long series of abuses.”
However, the SEC Chairman said the Commission will not change its approach, stressing that cryptocurrency companies must comply with existing laws.