The Securities and Exchange Commission on Friday rejected a petition from Coinbase, the largest crypto exchange in the U.S., for a separate regulatory framework for the cryptocurrency industry.
“The commission concludes that the requested rulemaking is currently unwarranted and denies the petition,” the SEC wrote in a letter addressed to Coinbase’s chief legal officer, Paul Grewal.
Gary Gensler, the chair of the SEC, cheered on the denial in a separate statement, saying that he supported the commission’s decision because, he argues, existing laws and regulations already apply to crypto, the SEC already addresses the industry through rulemaking, and it’s important for his agency to maintain control over what resources it deploys to oversee its regulatory agenda. “As I said prior to the collapse of one of the largest noncompliant crypto intermediaries that cost investors billions of dollars,” he wrote, “meaningful engagement with the SEC is always welcome.”
Grewal said in a post on X, formerly Twitter, that Coinbase plans to appeal the SEC’s rejection. “No one looking fairly at our industry thinks the law is clear or that there isn’t more work to do,” he wrote.
Today the SEC denied Coinbase’s petition for rules for crypto. After 18 months of silence, we went to court to get the response the law requires. With appreciation for the Third Circuit, later today we’ll again seek its help by challenging the SEC’s abdication of its duty. 🧵⬇️ pic.twitter.com/tFjiW53eF7
— paulgrewal.eth (@iampaulgrewal) December 15, 2023
The SEC’s ruling on Coinbase’s petition comes more than a year after the company filed its request with the agency, arguing that the “U.S. does not currently have a functioning market in digital asset securities due to the lack of a clear and workable regulatory regime.”
After the collapse of FTX in November 2022 and the subsequent arrest of the exchange’s CEO, Sam Bankman-Fried, the SEC, under the guidance of Gensler, has embarked on an extensive campaign against crypto.
In the first half of 2023, it targeted some of the largest players in the industry, filing suits against Gemini, Genesis, Terraform Labs and founder Do Kwon, as well as Justin Sun and Tron. In June, it launched salvos against two crypto heavyweights, first suing the world’s largest crypto exchange, Binance, and then filing a lawsuit against Coinbase. The SEC’s campaign has continued through the end of the year, with it most recently targeting another industry mainstay, the crypto exchange Kraken.
Most of its lawsuits against the industry’s top players are ongoing, even its litigation against Binance, which recently agreed to a $4.3 billion settlement with the Department of Justice for breaking anti-money laundering laws, among other crimes.
Coinbase, which positions itself as one of the industry’s do-gooders, has cried foul at the SEC’s extensive litigation against crypto, claiming the agency is “regulating through enforcement,” rather than rulemaking. Evidently, the SEC disagrees, and its lawsuit against Coinbase, which it alleges listed unregistered “crypto asset securities,” continues to wind its way through court.
Update, Dec. 15, 2023: Added in comment from Paul Grewal, Coinbase’s chief legal officer.