The United States Securities and Exchange Commission has denied a Coinbase petition for rulemaking on transactions with cryptocurrencies that are securities. Coinbase filed the petition in July 2022 and pushed steadily for a response.
SEC Chair Gary Gensler announced the commission’s decision in a Dec. 15 statement. He gave three reasons for denying Coinbase’s petition, which requested “rules to govern the regulation of securities that are offered and traded via digitally native methods, including potential rules to identify which digital assets are securities.”
Gensler first argued that existing laws and regulations already apply to crypto. His phrasing was nuanced:
“There is nothing about the crypto securities markets that suggests that investors and issuers are less deserving of the protections of our securities laws.”
Coinbase chief legal officer Paul Grewal, who signed the petition, had foreseen this argument and appended to the petition a discussion of the Howey test and Reves decision, U.S. Supreme Court “articulations” that are crucial to modern securities law. Gensler responded to the arguments in the Coinbase appendix. That was the only part of the 32-page petition that Gensler addressed directly.
Related: Coinbase reminds world it tried to ‘embrace regulation’ as SEC sues for violations
Gensler went on to say the timing is wrong for the rulemaking proposed by Coinbase. He said the SEC is currently soliciting comments on rules applicable to crypto. Finally, Gensler said rules are made at the discretion of the agency:
“We thoughtfully consider the timing and priorities of our regulatory agenda and how to best utilize our talented and hardworking staff.”
SEC Commissioners Hester Peirce and Mark Uyeda
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Author: Derek Andersen
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