The United States Securities and Exchange Commission (SEC) has responded to Coinbase’s petition, seeking a tailored regulatory framework for the crypto market, stating that the rulemaking petition is “unwarranted.”

However, two out of the five Commissioners disagreed with the decision, believing the agency should engage in robust public conversations that could result in rulemaking or guidance.

Gary Gensler: Existing Securities Laws Applied to Crypto

The SEC, in a letter to Coinbase’s chief legal officer Paul Grewal, on Dec. 15, 2023, said it opposed the petition’s claims that existing securities laws were “unworkable” for the crypto securities markets, stressing that “the requested regulatory action would significantly constrain the Commission’s choices regarding competing priorities.”

An excerpt from the letter reads:

“The Commission has carefully considered that recommendation, as well as the Petition and comment letters. After such consideration, and in the exercise of its broad discretion to set its rulemaking agenda, the Commission concludes that the requested rulemaking is currently unwarranted and denies the Petition.”

SEC chairman Gary Gensler supported the Commission’s response to Coinbase’s rulemaking petition, outlining three reasons why he was pleased with the denial.

According to him, existing securities regulations applied to crypto, with the chairman adding that the Howey Test, which the agency usually applied in various enforcement actions, was “flexible” and “capable of adaptation to meet the countless and variable schemes devised by those who seek the use of the money of others on the promise of profits.”

“Thus, to the extent that crypto assets are offered and sold in the form of an investment contract, and to the extent that entities intermediate transactions in crypto asset securities, the federal securities laws apply.”

The SEC chair furt