Coinbase Condemns SEC’s ‘Evasive Response’ to Court Mandate

The US Securities and Exchange Commission was recently heavily criticized by a Coinbase executive after it provided rather evasive responses to questions from the US federal court. 

The exchange’s Chief Legal Officer, Paul Grewal, commented on the regulator’s behavior in a series of tweets.

According to Grewal, the exchange could not wait for its deadline this week to address the SEC’s response to the June 6 order from the Third Circuit. 

He pointed out that:

“It is unusual for the government to defy a direct question from a federal court. But the SEC’s evasive response goes further, as we set out today.”

We couldn't wait until our deadline next week to address the SEC's response to the June 6 order from the Third Circuit. It is unusual for the government to defy a direct question from a federal court. But the SEC’s evasive response goes further, as we set out today. 1/5 pic.twitter.com/ssULmUpzi2

— paulgrewal.eth (@iampaulgrewal) June 17, 2023

Coinbase slams the SEC’s evasive response to a court order

According to the Coinbase filing, the exchange is now requesting “mandamus,” referring to a court order issued by a higher court to a government agency. The order commands the agency to perform a specific duty or action, legally obligating said agency to perform it. 

Simply put, Coinbase wants a federal judge to force the regulator to create rules and standards for the crypto industry.

This was the topic of Coinbase’s rulemaking petition from last year, which the SEC decided to completely ignore. 

Grewal said that the exchange would be more understanding if the Commission announced that it needed additional time to act on the petition. 

However, the SEC never acknowledged it and refused to say how much time it needs, prompting the exchange to conclude that the regulator is not doing anything about it.

With that being the case, any further delay is futile, according to Grewal.

The Commission’s refusal to say how much additional time it needs to act on Coinbase’s petition confirms that further delay is futile. 3/5

— paulgrewal.eth (@iampaulgrewal) June 17, 2023

Coinbase is now going on an offensive, asking that the court orders the SEC to report on its activities. 

He stressed that the exchange is not interested in an “anticipated” staff “recommendation,” but a proper report on what is being done to properly consider and act upon the exchange’s petition. 

What’s more, Coinbase wants a response within 60 days. 

If the SEC fails to act during this period, the exchange requests the court to order a prompt decision.

At a minimum, the Court should order the Commission to report on Its action –not an "anticipated" staff "recommendation"– in no more than within 60 days and decide the mandamus petition promptly If the Commission still has not acted at that time. 4/5

— paulgrewal.eth (@iampaulgrewal) June 17, 2023

Grewal concluded by saying that Coinbase and its executives continue to appreciate the court’s careful consideration.

What is the US SEC trying to do?

It is worth noting that while the SEC never responded to a petition, it still found the time to sue the crypto company earlier this month. 

In its filing, the regulator alleged that Coinbase failed to register as an exchange, clearing house, and broker, even though it had been providing these services to its customers for a while.

The SEC also included the claims of Coinbase selling unregistered securities on its platform. 

While the judge took note of the SEC’s filing against the exchange, he also ordered the regulator to respond to Coinbase’s petition. 

However, the SEC also ignored this order, only providing vague responses in return.

Coinbase further commented on the regulator’s behavior, saying that the SEC “pushes the limits of cognitive dissonance.” 

According to the exchange, the regulator demands compliance with rules that do not exist.

On the other hand, Gary Gensler, the acting chairman at the SEC, insists that the rules are there and that they are quite clear. 

But, despite these claims, the regulator requested that the court denies Coinbase’s request for rules.

At this point, nobody understands what the SEC is trying to do. It claimed that the rules already existed, but then it tried to get the court to reject requests for them. 

At the same time, it ignored a direct order from the court while trying to crack down on Coinbase after years of peaceful coexistence. 

Gensler continues to claim that the SEC “stands ready to help,” but so far, all that the regulator has done was try to destroy the crypto industry in the US.

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