SEC ordered to revisit Coinbase petition for rulemaking
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A federal appellate court on Monday ordered the Securities and Exchange Commission to revisit its decision not to write new rules for when digital assets fall under its authority.
Why it matters: The The 3rd Circuit Court of Appeals firmly rebuked the agency, calling its decision to deny a petition by Coinbase, the largest digital asset company in the U.S., "insufficiently reasoned, and thus arbitrary and capricious."
What's next: The court's three-judge panel declined to order the SEC to write a rule, as Coinbase requested, but instead ordered it to come back with "a sufficiently reasoned disposition of Coinbase's petition."
Between the lines: This is not the first time the courts have found a decision by the agency in crypto matters to be "arbitrary and capricious."
Catch up fast: Currently, there are two cases between the agency and the company.
- In one, the SEC sued Coinbase over allegedly listing securities on its platform without properly registering them, among other things. This is not that case.
- In this case, Coinbase formally petitioned the SEC for new rulemaking that would update securities laws for digital assets. After a long process, the SEC finally denied the petition with only a few sentences of justification. Coinbase then sued.
The latest: An SEC spokesperson told Axios it is reviewing the ruling.
What they're saying: "The SEC repeatedly sues crypto companies for not complying with the law, yet it will not tell them how to comply. That caginess creates a serious constitutional problem," Stephanos Bibas, one of the judges, wrote in a concurring opinion.
What we're watching: Whatever fresh reasoning the agency provides will be written under new leadership at the SEC, as its current chair has already stated his intention to resign on Inauguration Day.
