US Court of Appeals Orders SEC to Respond to Coinbase Petition

Ordered SEC to answer

A U.S. appeals court has ordered the U.S. Securities and Exchange Commission (SEC) to respond to a regulatory clarification petition filed by major U.S. cryptocurrency exchange Coinbase.

The Third Circuit just issued a text-only order directing the SEC to file a response to our mandamus petition within 10 days (and gave us 7 days for a reply). Here’s the text of the order:

TEXT ONLY ORDER (Clerk) At the direction of the Court, Respondent is ordered to file an…

— paulgrewal.eth (@iampaulgrewal) May 3, 2023

“The court has issued a written order to the SEC to provide a response to our petition within 10 days,” said Coinbase Chief Legal Officer Paul Grewal. Additionally, after receiving a response from the SEC, Coinbase will have seven days to respond.

As background, Coinbase filed a limited lawsuit against the SEC in April. It is a form of requesting a response to the “petition (signature document) seeking clarification of regulations regarding the virtual currency industry” that the company submitted to the SEC in July 2022.

The petition brings together more than 1,700 groups and individuals calling for “the development of a viable regulatory framework.” It argued that cryptocurrencies classified as securities “need new rules to guide safe and efficient practices.”

However, the SEC continues to take enforcement action against the cryptocurrency industry without providing a concrete public response. This stance has been criticized for arbitrarily cracking down without clear regulatory guidelines.

connection: Coinbase sues the US Securities and Exchange Commission for “clarification of regulations”

James Murphy, a U.S. attorney who specializes in securities law, said, “It is not surprising that the court order was issued swiftly, nor is it a signal that Coinbase will win the case.”

Murphy continued that it was unlikely that the SEC would easily agree to the rule-making process that Coinbase is seeking. The SEC could also argue that it has the right to take more time to consider Coinbase’s request.

It has also been pointed out that the SEC could seek to dismiss Coinbase’s lawsuit.

Responding over securities issues

Coinbase’s request for a response to the petition this time comes in the midst of a dispute with the SEC.

In March, the SEC issued a “Wells Notice” to Coinbase informing them that they would take legal action. The SEC has been investigating Coinbase for possible unregistered securities such as listed virtual currencies and staking service “Coinbase Earn”.

Coinbase publicly released its counter-argument to the SEC in April. Coinbase reiterates that it does not list any securities and criticizes the SEC for its arbitrary crackdown.

connection: US Coinbase publishes objection to SEC over unregistered securities issue

Launched offshore exchange

Against the backdrop of U.S. regulatory uncertainty, Coinbase today announced the launch of a derivatives exchange for the offshore market, Coinbase International Exchange.

Established in Bermuda, the exchange is poised to serve “institutional investors based in eligible jurisdictions other than the United States.”

connection: US Coinbase announces cryptocurrency derivatives exchange for offshore market

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