Coinbase (NASDAQ: COIN) has again attacked the Securities and Exchange Commission’s (SEC) alleged failure to respond to the exchange’s petition for the Commission to create new and specific rules over digital asset securities, this time using a recently-given public speech by SEC chair Gary Gensler as a lever to convince the court to force the SEC’s hand.
“At the same day the SEC told this Court that it has not yet made up its mind about Coinbase’s rulemaking petition, the SEC Chair stated unequivocally that there will be no rulemaking – because ‘the rules have already been published.'”
Coinbase refers to a keynote speech given by Gensler on May 15 at the Financial Markets Conference. Gensler was asked about the SEC’s dispute with Coinbase and why the SEC has yet to publish rules for the market.
“To make it quite direct: this is a field that has been operating largely non-compliant… There’s nothing about a new technology that makes it non-consistent with the public policies that Congress has laid out.”
Gensler no doubt is referring to the rules set out in the multitude of statues on the books which govern the securities industry, as well as decades of precedent under the Howey, the legal decision which establishes the test for determining whether an offering amounts to an investment contract and therefore a security.
To Coinbase, however, Gensler’s comments are a sign that the SEC has already made up its mind about Coinbase’s petition. Even if that isn’t the case, according to Coinbase’s latest filing, the court still does as Coinbase asks because the SEC is taking too long in the first place, all the while continuing to “pursue an aggressive, accelerating enforcement campaign regarding the very topics identified in Coinbase’s petition.”
On that basis, Coinbase argues that the court should grant its petition to force the SEC to respond to its rule-making request within seven days. Alternatively, Coinbase asks the court to order that the SEC explain its delay, state when it will respond, and provide progress updates to the court.
The SEC told the court that Coinbase has no basis to complain about a delay of months when courts have consistently declined to intervene in cases that have spanned years.
The filing is the latest jab from Coinbase in its quest to have the SEC issue new rules on digital asset securities.
Coinbase initially filed a petition with the SEC in July last year, asking the Commission to create and publish rules governing the regulation of digital asset securities, saying that the U.S. does not have a functioning digital asset securities market because of the ‘lack of a clear and workable regulatory regime’ and that the Commission had instead chosen an ‘enforcement-first’ approach.
The SEC evidently never responded to the petition and issued a Wells Notice to Coinbase warning that it violates securities laws and to expect imminent legal action. This spurred Coinbase to file in the Court of Appeals for the Third Circuit, asking the court to force the SEC’s hand.
In its initial response, the SEC said:
“That Coinbase would like its policy preferences addressed immediately does not entitle it to extraordinary relief ordering the Commission to act on a rulemaking petition that has been pending for well under a year.”
The court has not ruled on Coinbase’s filing, nor has the SEC responded to Coinbase’s latest request.
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