Coinbase, the largest cryptocurrency exchange in the U.S., has filed a lawsuit against the Securities and Exchange Commission (SEC), seeking to force the regulator to respond to its petition for clearer crypto regulations.
The petition, which was submitted in July 2022, asked the SEC to propose and adopt rules for digital asset securities, and to answer 50 specific questions that would provide “clarity and certainty” regarding the regulatory treatment of crypto assets.
According to Coinbase, the SEC has failed to respond to its petition within a reasonable time, as required by the Administrative Procedure Act. The exchange said it filed the lawsuit on Monday in a federal court in Washington D.C., asking the court to compel the SEC to share its decision on the petition.
Coinbase said it believes that the U.S. does not have a functioning market in digital asset securities due to the lack of a clear and workable regulatory regime. The exchange argued that new rules facilitating the use of digital asset securities would benefit the U.S. capital markets and foster innovation and competition.
The lawsuit comes amid growing tensions between Coinbase and the SEC over the regulatory status of crypto products and services. In September 2021, Coinbase revealed that the SEC had threatened to sue it if it launched a lending program that would allow customers to earn interest on their crypto holdings. Coinbase later scrapped the program, citing regulatory pressure.
The SEC has also been investigating Coinbase for allegedly violating securities laws by allowing its employees to trade in digital assets before they were listed on its platform. Coinbase has denied any wrongdoing and said it cooperates with all regulators.
The SEC has been cracking down on various crypto-related activities and entities, claiming that many of them involve securities offerings that need to be registered or exempted. The regulator has sued several crypto firms, including Ripple, Block.one, and Telegram, for allegedly selling unregistered securities in the form of digital tokens.
However, the SEC has also faced criticism from some lawmakers, industry players, and even its own commissioners for not providing clear and consistent guidance on how it applies securities laws to crypto assets. Some have accused the SEC of creating a “regulation by enforcement” approach that stifles innovation and harms investors.
Coinbase said it hopes that its lawsuit will help advance the dialogue between the crypto industry and the SEC, and lead to a more transparent and predictable regulatory framework for crypto in the U.S.