Cryptocurrency exchange Coinbase has accused the United States Securities and Exchange Commission (SEC) of intentionally stifling the digital assets industry. In a May 31 filing with the U.S. Court of Appeals, Coinbase claimed the SEC is determined to destroy the crypto sector through its regulation-by-enforcement strategy.
Lack of Fair Rules and Guidelines
Coinbase argues that the SEC is unwilling to establish clear and fair guidelines for the industry. “The SEC is serious about the destruction of digital assets,” Coinbase stated. The exchange contends that giving the SEC more opportunities to explain its actions is “pointless and exquisitely undeserved,” suggesting that the agency has no duty to make compliance feasible and believes its current rules are “workable enough” based on its enforcement actions against various firms.
Support from SEC Commissioners
Coinbase urged the court to consider the opinions of other SEC Commissioners who also believe the agency is hindering the digital assets industry. Notably, SEC Commissioner Hester Pierce, a vocal proponent of crypto, recently advocated for a cross-border sandbox program between U.S. and U.K. blockchain firms experimenting with tokenized securities. At Consensus 2024, Pierce mentioned, “People have tried to come into the SEC to get relief, but, you know, you sort of come in, and nothing happens. This would […] force the SEC’s hand a little bit.”
Also Read: HTX Crypto Exchange Surpasses Coinbase in Trading Volumes
SEC’s Defense and Coinbase’s Legal Battle
The SEC has attempted to downplay its stringent regulatory stance by asserting that its rules may only pose challenges for a small segment of the industry. However, Coinbase highlighted that the SEC’s actions have broader implications for the entire sector.
In June 2023, the SEC filed a lawsuit against Coinbase, alleging that the exchange had never registered as a broker, national securities exchange, or clearing agency, thus evading the disclosure requirements for securities markets. Although Coinbase has sought to have the case dismissed, the SEC has consistently opposed these attempts. Despite some optimism from the crypto industry and legal experts, including Bloomberg’s senior litigation analyst Elliott Stein, who predicted a 70% chance of a full dismissal, Coinbase has not been successful in getting the case dismissed.
