Coinbase clashed with the U.S. Securities and Exchange Commission (SEC) in a federal appeals court in Philadelphia on Monday, urging the agency to establish new regulations for digital assets. The largest cryptocurrency exchange in the U.S. filed a lawsuit against the SEC last year to compel action on its 2022 petition, which sought clarity on when a digital asset is classified as a security and the creation of a new market framework tailored to cryptocurrencies.
In December 2023, the SEC denied Coinbase’s petition, asserting that current regulations are adequate for the crypto sector. In court, Coinbase argued that the SEC’s refusal to provide guidance has hindered its ability to operate within U.S. laws. Eugene Scalia, representing Coinbase, criticized the SEC for being “arbitrary and capricious” in its lack of clarity regarding compliance.
Conversely, the SEC’s lawyer contended that the agency is not obligated to formulate new rules and that existing regulations should suffice. Ezekiel Hill, representing the SEC, stated that Coinbase cannot demand changes to the regulatory framework simply because it seeks to operate differently.
During the proceedings, the three-judge panel acknowledged the SEC’s discretion in rulemaking priorities but pressed the agency on why cryptocurrency has not been prioritized. This case is part of a larger conflict between the crypto industry and the SEC, which has consistently asserted that most crypto tokens qualify as securities and fall under its jurisdiction. Coinbase is also contesting the SEC’s allegations in a separate lawsuit, as the crypto sector maintains that it operates in a regulatory gray area requiring new legislation.
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