Recent times have been difficult for cryptocurrency exchanges operating in the United States. Both Binance and Coinbase have been sued for violating rules on trading unregistered securities, under the guises of many leading cryptocurrencies. However, the latter entity won the court’s favor in its case.
Offensive against SEC action
Judge Cheryl Ann Krause, of the U.S. Court of Appeals for the Third Circuit, issued an ultimatum to the Securities and Exchange Commission, giving it seven days to clarify its position on the petition filed by cryptocurrency exchange Coinbase. This is a decisive action by the court to gain clarity on the creation of regulations for digital assets and securities.
Coinbase, in July 2022, publicly petitioned the SEC to seek clarification from the Commission on key rules governing digital securities. In response, in April 2023, the SEC issued a warning to the exchange, stating that certain products offered by Coinbase were unregistered securities. As a result, the exchange decided to file a complaint with the Administrative Procedure Act, aimed at forcing a response from the Commission to its petition.
Coinbase demands clear guidelines
Paul Grewal, Chief Legal Officer at Coinbase, decided to comment on the situation on Twitter, expressing his position on the SEC’s response to the rulemaking petition. He wrote thus: “If the SEC responds to our petition in the negative, they are legally obligated to explain it to us, as we have the right to challenge this ‘no’ in court.” His words show Coinbase’s determination to defend its interests and rights.
He also pointed out the importance of setting rules and regulations before taking enforcement action, comparing it to traffic regulations that must be put in place and followed. Grewal stressed that rulemaking is key to ensuring clarity and protecting the interests of all parties.
SEC attacks Coinbase and Binance
The court order, which came in the wake of a growing legal conflict between the SEC and Coinbase. On Tuesday, June 6, the US Securities and Exchange Commission accused Coinbase of violating licensing rules and offering unregistered securities through its staking service.
Just a day earlier, a similar lawsuit was filed against Binance US. An offshoot of the world’s largest cryptocurrency exchange was sued for allowing trading in unregistered securities, under the forms of coins such as BNB, SOL, ADA, MATIC, ATOM, SAND, MANA, AXS and COTI.