Coinbase, the largest U.S. cryptocurrency exchange, has been embroiled in a legal battle with the U.S. Securities and Exchange Commission (SEC) over the need for new regulations tailored to digital assets. Coinbase asked a Philadelphia federal appeals court to reverse the SEC's decision to reject its regulation petition. The petition, filed by Coinbase in 2022, called for clear guidelines on when a digital asset should be classified as a security and proposed a new regulatory framework suited to cryptocurrencies. The SEC rejected this petition in December 2023, asserting that existing regulations are adequate for the crypto sector and disagreeing with Coinbase’s stance that current rules are “unworkable.”
During the court proceedings, Coinbase argued that the SEC’s refusal to create specific rules for digital assets has left the company in a regulatory quandary, hindering its ability to operate and comply with U.S. laws. Eugene Scalia, representing Coinbase, contended that the SEC’s actions were arbitrary and lacked necessary guidance for the crypto exchange to register and adhere to regulations. In response, SEC lawyer Ezekiel Hill maintained that the agency is not obligated to craft new rules for the crypto industry, emphasizing that existing regulations should suffice. The legal dispute underscores a broader struggle between the crypto sector, which claims it operates in a regulatory gray area, and the SEC, which insists that most crypto tokens are securities falling under its jurisdiction.
