On January 13, according to a court ruling, cryptocurrency exchange Coinbase won a victory in its legal battle with the US Securities and Exchange Commission (SEC).
The case revolves around Coinbase asking the SEC to clarify regulations regarding the application of federal securities laws to digital assets, including cryptocurrencies.
Court Asks SEC to Explain Coinbase’s Denial of Request
The US Court of Appeals for the Third Circuit held that the SEC’s denial of Coinbase’s request was without merit.
“The SEC’s order is conclusive and illogical, therefore arbitrary and baseless. We partially grant Coinbase’s petition and return it to the SEC for a more complete explanation. However, at this stage, we decline to require the agency to proceed with the rulemaking process,” the ruling said said.
The court remanded the case back to the SEC, directing the agency to provide a more detailed explanation for its decision. However, the court did not require the SEC to initiate formal rulemaking proceedings.
Coinbase petitioned the SEC in 2022 to create specific regulations regarding the application of federal securities laws to digital assets. The company argues that the current regulatory framework fails to accommodate the unique nature of digital assets, making compliance difficult.
Coinbase said that the SEC’s lack of clarity on when a digital asset is considered a security has created confusion. Furthermore, the agency’s inconsistent positions on the issue have worsened the situation.
The SEC denied Coinbase’s request in a brief and largely unexplained response. The regulator said it disagreed with Coinbase’s concerns and had higher priority issues to focus on. The SEC also suggested that it may want to gradually address the issue.
This prompted Coinbase to challenge the SEC’s decision by filing for judicial review.
“The SEC repeatedly sued cryptocurrency companies for failing to comply with the law, yet failed to tell them how to comply,” the court said.
This court ruling marks an important step in the current legal and regulatory battle surrounding cryptocurrencies and digital assets.
Will Coinbase’s Victory Help Ripple In Its Battle With The SEC?
Notably, online discussions have linked the SEC’s latest failure to the ongoing legal battle with Ripple. Many hope that this ruling could give Ripple an advantage.
“Ripple V SEC Will Be Cancelled. Insider predicts Coinbase’s ruling will be in Ripple’s favor,” said one crypto enthusiast write on X.
Ripple’s general counsel, Stuart Alderoty, also joined in the celebration, congratulating Coinbase on its win.
“In Gensler’s final days, his crusade against crypto is falling apart, and a federal appeals court has clarified what the industry has been saying for a long time: His selective enforcement of securities laws is a (not so) discreet attempt to ban the industry altogether. Shameful,” Stuart Alderoty said said.
The SEC now faces the task of explaining its position. It is unclear how the agency will respond to the growing demand for clarity in cryptocurrency regulation.
