Coinbase Sues SEC Over Unclear Rules

by Arthur · April 25, 2023

In a crypto world filled with bad guys, Coinbase has always touted itself as the good guy – a company that follows the rules and has worked with regulators and law enforcement since day one. So when the good guy in crypto decides to sue the federal government, it’s worth paying attention.

On Monday, Coinbase filed suit against the Securities and Exchange Commission, asking a federal appeals court to issue an order directing the agency to do its job — which in this case, Coinbase says, is to respond to the company’s petition seeking clearer regulations.

Coinbase has a point here. While the “need for regulatory clarity” is a buzzword the industry will shout to anyone who will listen, Coinbase and other crypto firms are right to complain about the SEC’s behavior. Over the past two years, the agency has filed lawsuits and extracted settlements that assume an unresolved legal question — whether a token is a security or not — is resolved. Businesses, like individuals, have a right to hear from the government what is allowed or not, especially when the future of their business is at stake. It is called legal certainty.

But just because you’re right doesn’t always mean you win. Although judges decide cases through a prism of the law, personal biases creep in, and right now it’s not hard to imagine that at least some of the judges on the Third Circuit, who are deciding the case, view crypto in a bad light. This could color their decision on whether, as Coinbase claims, the SEC needs to move forward with issuing rules for the crypto industry. The judges may conclude that the agency needs more time, or perhaps they will agree with the SEC that the rules are clear enough.

Coinbase’s lawyer told Fortune that even if the court sides with the SEC, this lawsuit is just an opening salvo that would give it the right to sue over broader issues. This is a sign that the company is willing to step up its efforts as it digs in for a protracted legal battle. This is brave, but also shows that Coinbase has its back against the wall and has no choice but to fight the federal government – and that’s not a position any company wants to find itself in.

Jeff John Robertpp
[email protected]
@jeffjohnroberts

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