Coinbase Scores Another Win Against &#039, Arbitrary and Capricious&#039, SEC Order

A panel of judges from the federal appeals court in Philadelphia on Monday delivered yet another blow to the SEC’s bitcoin program, emerging as the most recent important court to question how the agency has handled its digital asset rules. &nbsp,

Coinbase sued the SEC last time over the company’s failure to state its bitcoin policy directly, and the U.S. Court of Appeals for the Third Circuit ruled in favor of the ruling today. The SEC has otherwise intermittently sued crypto firms over the past six-odd decades in a design that has been derisively dubbed “regulation by enforcement” instead of putting forward crypto-specific rules.

Now a three-judge board, comprised of two Democrats and one Republican, ruled that the SEC’s contemptuous response to Coinbase’s demand for crypto-specific rulemaking was intolerable. &nbsp,

” Because we believe the SEC’s attempt was conclusory and insufficiently reasoned, and therefore arbitrary and capricious, we grant Coinbase’s plea in piece and trial to the SEC for a more complete description”, yesterday’s order reads. &nbsp,

The courts added that they declined, yet, to force the SEC to create crypto-specific laws, as Coinbase had requested. &nbsp,

A previous case law, including one involving the SEC, established that an organization like the SEC could only be forced to create laws against its will if an extraordinary delay in doing so “endangered people life,” according to Judge Thomas Ambro, a Democrat from the Clinton era who wrote Monday’s mind. &nbsp,

The SEC doesn’t now need to make new crypto rules, but it must explain to Coinbase in much more detail why it has so far refused to do so. &nbsp,

Judge Stephanos Bibas, a Republican who was appointed to the court by Donald Trump, wrote on Monday in a concurring opinion that” we order the agency to explain its decision not to” on Monday. ” Indeed, a rule may not prove necessary to solve the problems here, the agency could just state its position on crypto assets unequivocally” .&nbsp,

Bibas cautioned the SEC that it should address the issue head-on rather than avoid it.

” It should not give another poor explanation in an already-long line of them”, he said of the agency. &nbsp,

In a post on X ( previously Twitter ), Coinbase’s Chief Legal Officer Paul Grewal expressed his congratulations on the decision, noting that there was no way the court could have prevented the SEC from issuing new crypto rules. &nbsp,

” We appreciate the Court’s careful consideration,” Grewal wrote. &nbsp,

An agency spokesperson informed that those issues are currently being looked at internally when asked when the SEC plans to release an explanation of its crypto policies or what such an explanation might look like. &nbsp,

” We’re reviewing the decision and will determine next steps as appropriate,” the spokesperson said.

SEC chair Gary Gensler has long argued that his organization’s crypto policies need no justifications given their ostensibly obvious compliance with current securities laws. &nbsp,

That attitude has given him a lot of enemies in the industry. A recent wave of federal court decisions appear to have begun to dispute the chair’s narrative, which highlights the SEC’s approach to crypto firms as unusual and deserving of legal review.

The SEC’s crypto regime has experienced those potential legal cracks just days before it is likely to fall under the influence of the shifting political tides. Gensler will resign on January 20, the same day as President-elect Donald Trump’s inauguration. The chair’s likely replacement, former SEC commissioner Paul Atkins, is a crypto enthusiast who is almost certain to reverse the agency’s aggressive treatment of digital assets.