The U.S. Securities and Exchange Commission on Friday denied a petition by Coinbase Global (COIN.O) seeking new rules from the agency for the digital asset sector, which the country's largest crypto exchange then sought to challenge in court.
The five-member commission, in a 3-2 vote, said it would not propose new rules because it fundamentally disagreed that current regulations are "unworkable" for the crypto sphere, as Coinbase has argued. Coinbase later said it had filed a petition for review of the SEC's decision in court.
The dispute was the latest in a broader tug-of-war between the crypto sector and the top U.S. markets regulator, which has repeatedly said most crypto tokens are securities and subject to its jurisdiction. The agency has sued several crypto companies, including Coinbase, for listing and trading crypto tokens which it says should be registered as securities.
"Existing laws and regulations apply to the crypto securities markets," SEC Chair Gary Gensler said in a separate statement supporting the decision.
Coinbase disputed that assertion.
"No one looking fairly at our industry thinks the law is clear or that there isn’t more work to do," chief legal officer Paul Grewal said in a statement. "We should be working together to create laws and rules that will benefit consumers and US innovation".
Shortly thereafter, Coinbase notified a federal court of appeals in Philadelphia of its plans to seek review of the SEC's denial.
The SEC's decision was "arbitrary and capricious" and an "abuse of discretion", Coinbase said in a court filing that Grewal shared on social media platform X.
In 2022, the company pressed the SEC to create a bespoke set of rules for the crypto sector, arguing that existing U.S. securities laws are inadequate. In April, Coinbase appealed to a judge to force the SEC to respond to the petition.
The court said it would not force the agency to act, given the SEC had said it would respond to Coinbase's petition.
Crypto firms have said they want a clearer idea of when the SEC views a digital asset to be a security.
In his statement on Friday, Gensler argued that in asking the SEC to write rules, Coinbase had acknowledged the SEC's authority over the crypto sector, something the crypto exchange has refuted in the past.
Republican SEC Commissioners Hester Peirce and Mark Uyeda said in a joint statement that they disagreed with the decision.
"In our view, the Petition raises issues presented by new technologies and other innovations, and addressing these important issues is a core part of being a responsible regulator," they said.
