SEC Given 10 Days to Respond to Coinbase Complaint

On May 4, 2023

Join Our Telegram channel to stay up to date on breaking news coverage

On May 4, Coinbase’s Chief Legal Officer, Paul Grewal, announced a significant development in the ongoing legal battle for regulatory clarity in digital asset trading.

U.S. Court of Appeals Responds to Coinbase’s Complaint Against SEC Over Regulatory Clarity

The United States Court of Appeals for the Third Circuit has responded to Coinbase’s complaint against the U.S. Securities and Exchange Commission (SEC) regarding the need for clear rules in this area.

According to Grewal, the court’s response to the complaint was a text-only order. As a result, the SEC has been instructed to respond to Coinbase’s writ of mandamus within ten days. A writ of mandamus is a court order directed at a government official, requiring them to correctly carry out their official duties. This development represents a crucial step forward in the fight for more explicit regulations surrounding digital assets and their trading.

In addition to the court’s instruction for the SEC to respond to Coinbase’s writ of mandamus within ten days, the court has granted Coinbase the right to file a reply to the SEC’s response within seven days of its filing. Paul Grewal expressed appreciation for the court’s thorough examination of the case.

Coinbase, the largest cryptocurrency exchange in the United States, filed a lawsuit in April requesting that the court compel the SEC to publicly disclose its stance on a petition the exchange had submitted several months earlier. The petition contained 50 specific questions about the regulatory treatment of certain digital assets, covering topics such as how tokens are classified as securities and seeking clarification on other matters.

Despite the lack of public response to the petition, the SEC has been increasing its enforcement efforts and issuing warnings to cryptocurrency exchanges. In the past, the commission even gave a Wells notice to Coinbase, a letter that typically warns a company that the SEC may follow with an enforcement action.

Coinbase Faces Legal Challenges and Regulatory Uncertainty as Citigroup Downgrades the Exchange Shares

Recently, Citigroup, a major investment bank in the U.S., downgraded a crypto exchange’s shares from “buy” to “neutral” and also reduced its price target, citing regulatory concerns as the main reason. Citi analyst Peter Christiansen explained that too many uncertainties exist, and the downgrade will persist until more clarity on the regulatory “rules of the road” in the United States.

Coinbase has been facing legal issues recently. In March, it received notice from Wells Fargo about securities violations from the SEC, which caused its stock price to drop by 16%. This suggests that the company may face penalties in the future. In April, Coinbase fought back by filing a lawsuit against the SEC to seek clarity on regulations for some digital assets.

Citi analyst Peter Christiansen noted that regulatory concerns are a major factor in the debate about investing in Coinbase. He outlined a few possible scenarios for how the situation may unfold.

In addition to the legal challenges posed by the SEC, Coinbase also faces two class-action lawsuits. The first lawsuit alleges that the company’s collection of customer biometric data violated privacy laws in Illinois. In contrast, the second lawsuit accuses certain executives of insider trading, claiming they benefited from privileged information during the company’s initial public offering.

Given the regulatory uncertainty surrounding the company, Citi analyst Christiansen has chosen to remain neutral on Coinbase’s shares until there is more clarity on the regulatory landscape in the U.S. market.