A trio of judges from the U.S. Court of Appeals for the Third Circuit has urged the SEC to justify its lack of response to Coinbase’s appeals for definitive regulations.
A recent decision by the judges has termed the SEC’s conduct as “arbitrary and capricious”.
On Monday, the U.S. Court of Appeals for the Third Circuit required the SEC to clarify its refusal to establish clear crypto regulations in response to Coinbase’s requests after the agency served the exchange with a Wells Notice in March 2023.
One of the judges remarked, “Instead of compelling the agency to formulate a rule, we mandate it to explain its choice not to do so.” Another judge warned the SEC against providing a deficient explanation as it has previously done.
The SEC vs Coinbase
The case initiated by the SEC against Coinbase commenced in March 2023 when it issued a Wells Notice to the exchange for contravening securities regulations through its staking services and asset listings.
Coinbase reacted with assurance regarding the legality of its activities and sought to engage with the regulator to clarify the rationale behind its Wells Notice and establish clear regulations.
However, the SEC insisted that existing securities regulations were adequate for governing cryptocurrencies and proceeded to file a lawsuit in June 2023.
Recent developments
Coinbase triumphed against the regulator following a ruling to suspend the case due to the novel issues, as various courts across the nation are arriving at different conclusions on whether cryptocurrencies qualify as securities.
The SEC’s case will now advance to an appellate court, where it will be determined if it should be adjudicated in a district court.
This latest development from the panel of the U.S. Court of Appeals for the Third Circuit represents another setback for the SEC just a week before Gary Gensler’s term as SEC Chair concludes.
Meanwhile, Coinbase’s Head of Legal, Paul Grewal, considers this a victory for Coinbase.
https://twitter.com/SECGov?ref_src=twsrc%5Etfw
https://twitter.com/iampaulgrewal/status/1878860619895685283?ref_src=twsrc%5Etfw
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