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A federal court has forced the SEC to explain its denial of Coinbase’s rulemaking petition, marking a pivotal moment in cryptocurrency regulation battles.
Court Forces SEC to Justify Actions in Coinbase Crypto Clash
A significant legal milestone has been reached in the ongoing conflict between Coinbase and the U.S. Securities and Exchange Commission (SEC). Coinbase Chief Legal Officer Paul Grewal announced on social media platform X Monday that the Third Circuit Court of Appeals granted the company’s petition for a writ of mandamus. Grewal explained:
We just won our petition for a writ of mandamus at the Third Circuit.
“Rebuking the SEC for its order denying our rulemaking petition, the Court held that the ‘SEC’s order was conclusory and insufficiently reasoned, and thus arbitrary and capricious, we grant Coinbase’s petition in part and remand to the SEC for a more complete explanation,'” the Coinbase legal chief added.
The Third Circuit Court of Appeals issued a writ of mandamus directing the SEC to provide a reasoned explanation for its actions. Coinbase requested this remedy after the SEC denied its rulemaking petition, which sought clear regulatory guidelines for the cryptocurrency industry, without offering an adequate rationale for the denial.
The ruling has been met with approval from several crypto advocates and legal experts. Stuart Alderoty, general counsel at Ripple, celebrated the decision, stating: “In Gensler’s final days, his anti-crypto crusade is imploding, and a federal appeals court has laid bare what the industry has said for years: his selective enforcement of securities laws was a (not so) covert attempt to ban the industry outright. Shameful.”
Jake Chervinsky, chief policy officer at Blockchain Association, described the decision as groundbreaking. “Congrats and thanks to Coinbase for this victory over the SEC,” he wrote, elaborating:
This is a particularly big win since it comes from a circuit court, where binding precedent is set, but few crypto cases have gone up on appeal. Bit by bit, the judiciary is reining in the administrative state.
However, some legal experts, like attorney Fred Rispoli, viewed the decision as a setback for Coinbase, noting that the company lost on most arguments and only gained a minor victory late in the ruling. He explained that the SEC’s failure to provide a sufficient reason for denying Coinbase’s petition could be easily addressed on remand. Nonetheless, Rispoli highlighted the importance of Judge Stephanos Bibas’s concurring opinion, which emphasized that outdated regulations are ill-suited for modern technologies like cryptocurrency. He suggested that if the 2nd Circuit adopts similar reasoning, it could significantly weaken the SEC’s regulatory approach to cryptocurrency.