A Jan. 13 decision by the US Court of Appeals of the Third Circuit gave Coinbase a partially successful outcome in their legal battle with the Securities and Exchange Commission.
The panel of judges, led by Circuit Judge Ambro, deemed the SEC’s reasoning “arbitrary and capricious”: under the Administrative Procedure Act, a requirement that agencies explain their decisions.
The following are some of the ways to get in touch with each other:he court’s opinion also criticized the SEC for insufficiently justifying its decision to deny Coinbase’s petition for more explicit crypto rules. The regulator must now justify its reluctance to issue clear crypto rules in the US.
Seeking clear rules
Coinbase filed a petition with the SEC for new regulations in 2022, tailored to the specific nature of digital assets including cryptocurrencies and tokens. It argued that securities law was outdated. “fundamentally incompatible” With blockchain technology, compliance is economically unfeasible.
This exchange highlighted the challenges of decentralized issuers, non-investment usages for many digital assets and transaction fees as well as network governance.
SEC declined the petition on December 20, 2023. It provided only a very brief explanation. They stated the laws in place were sufficient and said that their priorities included enforcement measures and incremental steps.
Coinbase filed a court review petition, requesting that the SEC give a better explanation.
Win a partial win
The Third Circuit did not order the SEC initiate rulemaking in its opinion. This was a win for agency discretion. However, the court concluded that the SEC’s denial of Coinbase’s petition lacked sufficient reasoning.
While regulatory agencies are given wide discretion, they must base their decisions on a basis of law. “discernible path” Logic is the basis of all rationality.
The Court added
“The SEC repeatedly sues crypto companies for not complying with the law, yet it will not tell them how to comply. That caginess creates a serious constitutional problem; due process guarantees fair notice.”
The court stated also that the regulator did not give notice to due process and does not offer any meaningful guidance as to which crypto assets should be considered securities.
In addition, it questions SEC’s views on major crypto, such as Bitcoin, Ethereum, and other stablecoins. The ruling added:
“Existing rules do not fit blockchain technology, but the SEC refuses to recognize this. Its official silence and contradictory unofficial signals breed uncertainty. Crypto issuers and exchanges are left to cross their fingers and pray that the agency does not fault them.”
The community welcomes the ruling
Coinbase’s chief legal officer, Paul Grewal, Share This Article Legal victory is appreciated and a legal verdict. “court’s careful consideration.”
Jake Chervinsky Chief Legal Officer of Variant Fund Congratulations The exchange of views and the considerations for the future “big win,” The partial grant was made by a Circuit Court. This decision establishes a precedent that will be followed in future crypto-related cases.
Ji Kim, the CEO of Crypto Council for Innovation CCI (also known as CCI), Congratulations Coinbase highlights an Amicus Brief filed by CCI on the case.
It stated:
“Without SEC guidance, industry participants must try to figure out whether they have to register as dealers and, if so, which assets they can handle in the registered entity.”
Katherine Minarik Chief Legal Officer at Uniswap Labs highlighted that two actions in the Third Circuit prompted a proper SEC response — “as it should.”
Alex Thorn, Head of Research at Galaxy Digital Comments The ruling was “huge”The’and “a repudiation of the SEC’s stance across myriad cases” about no rulemaking being required in addition to the existent legal framework.
Although the ruling doesn’t demand rulemaking by the SEC, he noted that it requires a complete explanation, which Thorn believes is a “pretty big smackdown.”
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