CryptoLaw founder John E. Deaton applauded U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler after Coinbase’s proposal to create new cryptocurrency rules was rejected.
This week, the SEC denied Coinbase’s 30-page “rulemaking petition.” Gensler argues that current securities frameworks adequately govern crypto-asset securities and actively address the crypto-securities market through rulemaking and enforcement.
The SEC’s decision prompted Coinbase to immediately file a court challenge. The company asked the U.S. Court of Appeals for the Third Circuit for review, arguing that the SEC’s refusal to participate in the rulemaking was arbitrary.
The SEC claims it is already addressing the cryptocurrency securities market through rulemaking and enforcement actions.
Deaton took issue with Gensler’s social media comments, accusing the SEC chairman of “gaslighting the American people.”
According to Deaton, the Coinbase petition is consistent with Gensler’s previous acknowledgment of the unique nature of cryptocurrencies and current regulatory gaps.
Deaton refers to Hinman Speech emails indicating that others shared this view.
Deaton said the political twist was concerning. He argues that the SEC should be independent, but is simply being weaponized.
This highlights the ongoing conflict between cryptocurrency companies and regulators regarding the need for specific regulation in the cryptocurrency space.
Deaton also criticized JPMorgan Chase CEO Jamie Dimon and Massachusetts Sen. Elizabeth Warren for their anti-crypto stances.
“If I were the government, I would shut it down,” Dimon said recently.
SEC vs Coinbase
On December 15, Coinbase’s Chief Legal Officer Paul Grewal gave advance warning that Coinbase would take legal action.
Coinbase has officially initiated legal action. challenge We object to the SEC’s denial of the 2022 rulemaking petition.
Expressing the company’s commitment, Paul Grewal, Coinbase’s Chief Legal Officer, shared the following: filing As for X, the decision was described as “arbitrary and capricious.”
Coinbase argued in its petition for review that the SEC’s denial was an “abuse of discretion, a violation of the law, and a violation of the Administrative Procedure Act.” Coinbase argues that the SEC’s reluctance to engage in rulemaking while enforcing regulations through actions that exceed its statutory authority violates the APA and its fundamental principles of fairness.
In July 2022, Coinbase filed a petition highlighting the need for clarity on non-securities cryptocurrency assets, arguing that the cryptocurrency industry requires an “updated rulebook” for guidance.
After the SEC failed to respond to the petition and Coinbase received the Wells notice, the exchange escalated the matter by filing a mandamus with the Third Circuit while simultaneously filing a petition for review on the same docket.
Earlier this year, Coinbase requested regulatory clarity from the agency, but was denied both times.
At the same time, the SEC is pursuing a lawsuit against Coinbase alleging it operates an unregistered exchange and offers and sells unregistered securities, including targeting staking products.
Despite these legal developments, Gensler agreed with Coinbase’s decision to deny the rulemaking petition and said continued initiatives will inform potential changes to the existing regulatory framework.
Grewal countered, arguing that industry observers recognize the lack of clarity in the law and the need for further work in the cryptocurrency sector.