2024

Circuit

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Coinbase has <a href="https://twitter.com/iampaulgrewal/status/1767293877285970411" rel="noopener noreferrer nofollow">launched</a> a formal appeal against the U.S. Securities and Exchange Commission (SEC), criticizing the regulator's denial of its rulemaking petition and challenging the SEC's authority over the digital asset space.&nbsp;
In a series of posts, Paul Grewal, the chief legal officer of Coinbase, outlined the company's frustration with the SEC's "perfunctory denial" and lack of clear rationale.
He has stressed the inconsistency in the SEC's stance on its regulatory authority over digital assets.
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 Today <a href="https://twitter.com/coinbase?ref_src=twsrc%5Etfw" rel="noopener noreferrer nofollow">@coinbase</a> filed our opening brief in the Third Circuit challenging the SEC’s denial of our rulemaking petition. Tl;dr: the SEC’s denial is arbitrary and capricious, an abuse of discretion, and a violation of the Administrative Procedures Act. 1/7 <a href="https://t.co/v09uE2OHsb" rel="noopener noreferrer nofollow">https://t.co/v09uE2OHsb</a>— paulgrewal.eth (@iampaulgrewal) <a href="https://twitter.com/iampaulgrewal/status/1767293877285970411?ref_src=twsrc%5Etfw" rel="noopener noreferrer nofollow">March 11, 2024</a>
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<h2 id="the-sec-s-changing-stance-and-coinbase-s-challenge">The SEC’s changing stance and Coinbase's challenge</h2>
For years, the SEC recognized its limited authority in the digital asset domain, prompting calls for Congress to grant it broader regulatory powers.&nbsp;
However, <a href="https://u.today/bitcoin-btc-hits-ath-on-coinbase-its-more-important-than-price" rel="noopener noreferrer nofollow">Coinbase</a> argues that the SEC has abruptly claimed extensive authority and initiated a broad enforcement campaign against the crypto industry, frequently altering its legal interpretations.&nbsp;
Grewal emphasizes that any assertion of new authority by the SEC should be accompanied by a formal rulemaking process. This is a step the SEC has skipped, leading to what Coinbase sees as a "disjointed regulation by enforcement" approach.
<h2 id="legal-and-practical-complexities">Legal and practical complexities&nbsp;</h2>
Coinbase’s appeal shows the practical difficulties of applying traditional securities regulations to digital assets, which inherently settle without physical delivery of securities certificates.&nbsp;
The brief argues that treating all entities involved in digital asset transactions as "clearing agencies" under these conditions is unfeasible, especially for decentralized blockchain components that operate autonomously.&nbsp;
Coinbase contends that this lack of clear regulatory framework not only hinders the workability of existing laws for digital assets but also fails to provide necessary guidance for the industry. This undermines the legal and operational foundations of the digital asset market.

Coinbase Hits Back at SEC, Files Opening Brief in Appeal Process

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