Coinbase Inc. (COIN) has gained allies in its legal battle against the United States Securities and Exchange Commission (SEC) to force the agency to reconsider its refusal to write specific rules to govern the cryptocurrency industry, with Paradigm, the Crypto Council for Innovation, and others filing outside arguments with the circuit court.
Paradigm’s lawyer said in a friend-of-the-court brief on Monday that the SEC is attempting to treat cryptocurrency as if it is a product of the old financial system, in which a company issues a security and is responsible for telling the public about it.That is a difficult undertaking for a cryptocurrency project without a base of operations, a dedicated team, or a central source of management, according to the crypto investment firm.
“As long as the SEC’s registration process requires a centralized issuer, it will be incoherent for crypto assets, meaningful disclosures will not happen, and the public will not have access to the material information that it needs,” according to the Paradigm brief filed with the U.S. Court of Appeals for the Third Circuit. It also cited the fact that the Republican duo on the five-person commission is in stark disagreement with Chair Gary Gensler that what the SEC is doing is clear, fair and based in the law.
Coinbase had formally petitioned the SEC to create crypto sector guidelines in 2022, but the agency rejected it in December.Last Monday, the business filed a lawsuit attempting to get the regulator to change its judgment.
The Crypto Council for Innovation (CCI) stated in an amicus brief that the SEC is not allowing the industry to have a say in how it is controlled, which is prompting enterprises to seek a better arrangement in other nations.
“Deprived of traditional rulemaking, good actors are forced to decipher the SEC’s evolving views based on public statements by officials, litigation filings, and (sometimes contradictory) judicial rulings in enforcement actions,” argued CCI , a group advocating for policies friendly to the digital assets sector. “Industry participants seeking regulatory clarity are fleeing abroad to jurisdictions that offer the regulatory guidance the SEC refuses to provide.”
Coinbase’s chief legal officer, Paul Grewal, wrote on X that the business is “grateful” for the influx of briefs from other groups such as the US Chamber of Commerce and the Texas Blockchain Council.When weighing the underlying issue of the dispute, the court can take into account such legal interpretations from interested parties.
“Compliance requires predictability,” Paradigm contended. “That is what Coinbase’s petition for rulemaking seeks – strikingly, too, because it is not every day that a company asks the government to regulate it. The SEC’s refusal to initiate a rulemaking continues its ad-hoc approach of regulation-by-enforcement, where attempts at compliance lead only to punishment.”
A number of the industry’s many ongoing court disputes have sided with the SEC, arguing that some cryptocurrencies should be classified as securities and monitored by the agency.The regulator can also point to one new cryptocurrency platform, Prometheum, which is proceeding as if the SEC is correct about everything.If Prometheum’s proposal to launch a custodial operation this month is successful, followed by its intention to begin trading, it might invalidate Paradigm’s claim that all crypto firms that have attempted to do business under SEC registration have failed.