A judge has just ordered the US Securities and Exchange Commission (SEC) to provide a more thorough response to a petition from Coinbase.
In July 2022, the top US crypto exchange petitioned the SEC to create a new regulatory framework for digital assets, but the regulator rejected the proposal in December 2023 with a one-paragraph notice, saying it disagreed the idea that securities laws do not apply to the crypto industry.
The SEC also argued that it had other regulatory priorities and discretion over the “timing and priorities of its regulatory agenda.”
Coinbase, unhappy with the response, petitioned a court to review the SEC’s decision. The exchange also asked the court to order the SEC to initiate regulatory proceedings on digital assets.
In a new ruling filed this week, Circuit Judge Thomas L. Ambro declined to order the SEC to create new rules for digital assets. However, he did tell the SEC to expand its response to Coinbase’s petition.
“The SEC’s order was arbitrary and capricious because it was persuasive and inadequately reasoned. We therefore partially grant Coinbase’s petition. The solution at this stage is not to order the SEC to initiate regulatory proceedings, but to return Coinbase’s petition to the agency for duly substantiated resolution.”
Coinbase Chief Legal Officer Paul Grewal praised the ruling, likening it to a football referee having to interpret a penalty flag.
“You can’t just throw the yellow flag and punish. You have to explain why and what happens next: offside, number 85, 10 meter penalty, repeat first.”
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