US judge gives SEC 7 days to respond to Coinbase (COIN) regulatory lawsuit

The US Court of Appeals for the Third Circuit has ordered the US Securities and Exchange Commission (SEC) to clarify its position on a regulatory filing by cryptocurrency exchange Coinbase (COIN).

In April, Coinbase filed an Administrative Procedure Act challenge asking the court to force the SEC’s hand and force the regulator to respond to its 2022 petition for formal rulemaking in the digital assets sector, arguing that the existing requirements are ill-suited to digital assets.

Now, the SEC has been ordered to explain within 7 days whether it intends to deny Coinbase̵[ads1]7;s request, the reasons for such a decision, or a timeline for when it expects to reach a decision.

“Regulations, from legislation or regulations or both, must come before enforcement actions. That’s why we petitioned the SEC to create regulations almost a year ago in the first place,” Paul Grewal, Coinbase’s Chief Legal Officer, said in a tweet thread.

All this comes as the SEC is suing Coinbase over allegations that it operates an unregistered securities exchange.

“We continue to believe that the SEC could not proceed with litigation against our industry, such as the case filed against us today, if the SEC had not already decided to deny our petition for rulemaking,” Grewal tweeted.

The SEC must also explain why the court should not continue to oversee the case and why the SEC should not provide Coinbase with regular regulatory updates as requested.

“If the SEC’s answer to our petition for rulemaking is ‘no,’ then they are required by law to tell us, because we have the legal right to question that ‘no’ in court. And there are serious questions to ask, Grewal concluded.

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