Coinbase files legal challenge to push SEC to write rules on crypto

By Hannah Lang

(Reuters) – Coinbase (NASDAQ:) Global Inc filed a petition on Monday in an effort to compel the U.S. Securities and Exchange Commission to create new rules for digital assets, the company said in a blog post, in the latest escalation of the cryptocurrency exchange’s tensions with the securities regulator.

Coinbase filed a petition for rulemaking with the SEC last year in which it urged the regulator to provide clarity on the circumstances under which a digital asset is a security and create a new market structure framework that is compatible with cryptocurrencies.

The SEC has not responded publicly to that petition, which led to Coinbase filing the legal challenge, said Coinbase Chief Legal Officer Paul Grewal in the blog post.

“Coinbase and other crypto companies are facing potential regulatory enforcement actions from the SEC, even though we have not been told how the SEC believes the law applies to our business,” said Grewal.

The petition will be filed in the U.S. Court of Appeals for the Third Circuit.

The crypto industry largely believes it operates in a regulatory gray area not governed by existing U.S. securities laws, and that new legislation is needed to regulate the sector.

SEC Chair Gary Gensler has said cryptocurrency firms should comply with existing laws and that new crypto-specific regulations are not necessary.

Coinbase disclosed in March the firm had been told that SEC staff intended to recommend enforcement action against the company. The company said in a blog post at the time that it was willing to fight any forthcoming enforcement action in court.

In July, when Coinbase also submitted its petition for rulemaking, the firm disclosed an SEC probe into its asset listing processes, staking programs and yield-generating products.