Coinbase has filed a response in support of its injunction petition to the United States Securities and Exchange Commission (SEC) in its latest move to have the SEC set rules on digital assets. Coinbase’s chief legal officer, Paul Grewal, called the mandamus “the custom remedy for extraordinary events.”
Coinbase filed a petition with the SEC in July of last year, “requesting that the Commission propose and adopt rules to regulate securities that are offered and traded through digital native methods, including possible rules to identify which digital assets are securities.” It posed 50 questions for the agency to take into account when formulating standards.
Coinbase’s filing on May 22 claimed that the agency had made the decision to reject Coinbase’s request from July, but had not made it public. Furthermore, the SEC’s inaction is allegedly part of a larger pattern:
“The SEC does not dispute that since 2017 it has received five rulemaking requests related to digital assets and has not acted on any.”
Coinbase and the SEC made arguments regarding the appropriate response time for rulemaking, even with a mandamus. Coinbase argued in its new filing that its case was different from others:
“But the SEC has not cited, and Coinbase has not found, a single case where a court has approved even a months-long delay when an agency was actively pursuing enforcement on the same issues as the rulemaking petition, let alone when the agency was threatening to sue the rulemaker itself.”
Receiving no response to the petition before April, Coinbase filed a mandamus, a formal request to compel the agency to respond, with the US Court of Appeals for the Third Circuit. The SEC could respond under the mandamus by rejecting the petition’s call to action. However, if it did, it would expose itself to further legal action to force the adoption of digital asset standards.
Late last night Coinbase replied in the Third Circuit to the SEC’s arguments against our petition for a writ of mandamus. Mandamus is the tailor-made remedy for the extraordinary facts presented here. We continue to appreciate the Court’s consideration. https://t.co/OD02kX3524
— paulgrewal.eth (@iampaulgrewal) May 23, 2023
The SEC also did not initially respond to the mandamus. After being forced to do so by a court ruling, the SEC responded on May 15 with a brief asking the court to deny the petition. It argued that Coinbase’s request was unreasonable and that the regulation could take years to develop.
However, the SEC Chairman, Gary Gensler, gave a speech the same day and said, in response to a question from the audience, that “the rules have already been published” for the cryptocurrency market, referring to the current securities legislation.
Coinbase suggested that the SEC be required to respond to its July request within seven days or explain the delay and set a deadline.
Coinbase received a Notice from Wells on March 22 stating that it was under threat of legal action from the SEC for “potential violations of securities laws.”
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