SEC responds to Court’s order for letter regarding Coinbase’s Writ of Mandamus

On Jun 21, 2023

The SEC has responded to the Court’s order requiring a letter regarding Coinbase’s attempt to have the Court force the SEC to provide clarity to the crypto industry.
The SEC continues its delay tactics while asking the Court for 120 days to provide a status update on a recommendation.

On June 6, 2023, the court ordered the SEC to submit a letter addressing issues related to Coinbase’s Writ of Mandamus filed in relation to Coinbase’s rule making petition. The SEC’s response letter was filed on June 13th and is telling with the SEC up to its same old tricks.

The SEC’s response starts out with a statement about them anticipating making a recommendation in 120 days is very likely an attempt to buy time. The SEC further says that they will provide a status report at end of the 120 days. The SEC further asks the court to wait to rule on Writ of Mandamus. This stall tactic of course pushes things well over a year past Coinbase’s request for crypto asset clarity originally on July 21, 2022. This also leaves the door open, as the SEC likely intends, for the SEC to further delay making the recently filed lawsuit by the SEC again Coinbase more difficult for Coinbase.

Turning the specifics, the Court ordered a letter addressing:

“(1) whether the SEC has now decided to deny Coinbase’s petition for rulemaking;

SEC deflects and says they still haven’t decided what action to take on Coinbase’s rulemaking petition. The SEC argues that they can and should do enforcement while rules are developed, this of course ignores that fact that without clarity, crypto projects, exchanges, etc., are unable to legitimately or fairly respond to SEC enforcement actions. In other words, SEC muddies the waters to make it difficult for their opponents in court actions SEC initiates. The SEC continues to be a bully and tries to ensure its opponents are at a disadvantage.

The SEC argues that fact that they sued Coinbase is no way indicates that the SEC has decided to deny Coinbase’s rulemaking petition. This is a weak argument because again the SEC is withholding the clarity that Coinbase needs to vigorously respond. This leaves Coinbase no choice but to vigorously assert its position that it has not violated that law in the current enforcement action while being at an information disadvantage. There’s also the risk that if Coinbase makes changes or takes actions as a company, the SEC may attempt to use such actions against them. For example, if Coinbase removes crypto assets from its exchange, the SEC could argue that is an admission by Coinbase that the removed crypto assets are crypto asset securities or Coinbase knew or should’ve known they were securities.

(2) if not, how much additional time the SEC requires to decide whether to grant or deny that petition; and

Similar to the SEC’s response to Coinbase’s Writ of Mandamus filing, the SEC states that it is not subject to a specific deadline. The SEC further argues that Coinbase is not entitled to have the Court force the SEC to be subject to a deadline via a writ of Mandamus. The SEC also points out that the rulemaking petition is still under a year old. This, of course, ignores the fact that that Coinbase has been public for over two years (April 2021) and was probably interacting with the SEC for months before that. This is further also ignores that the SEC has had years to address or research these issues as the crypto assets in question have been around for years.

(3) why this Court should not retain jurisdiction and (a) order periodic reports as Coinbase has proposed, and/or (b) establish a deadline by which the Court will rule on Coinbase’s Petition for Writ of Mandamus if the SEC has not yet granted or denied the petition for rulemaking.”

The SEC claims that Coinbase’s request for periodic reports is unwarranted. Given the fact that updates could have a significant impact on the case and even level the playing field for Coinbase, it’s all the more reasonable that a Court grant a request for such updates. The SEC shouldn’t be allowed to keep Coinbase and the crypto industry in the dark. The SEC then argues that Coinbase hasn’t argued bad faith or unreasonable delay. This ignores the fact that Coinbase has argued that the lack of clarity is negatively impacting the crypto industry.

The SEC goes on to cite cases that involve regulatory agencies with delays of multiple years. Specifically, the SEC cited cases with 5 year and 8 years delays. This is in line with the cases cited previously by the SEC.

The SEC’s letter is then silent with regard to jurisdiction and finishes up with stating that a status report on their recommendation is anticipated in 120 days on October 11, 2023 and asking the Court deny Coinbase’s petition or not take any action under the 120 days are up.