Coinbase filed a lawsuit against the Securities and Exchange Commission (SEC) seeking a writ of mandamus. The company has been urging the SEC to establish clear rules for the offer, sale, registration, and trading of digital asset securities, aiming to provide fair notice to all market participants and facilitate global resolution through consolidated judicial review. Coinbase argues that despite numerous efforts, including a rulemaking petition, meetings, and supplemental comments, the SEC has not taken any action on Coinbase's request or provided feedback on its proposals.
Coinbase's July 2022 rulemaking petition called for clarity in several areas, such as the identification of digital assets that are securities, registration of issuers, exemptions and mandatory disclosures, and registration of exchanges. Coinbase notes that over a thousand entities and individuals have filed comments supporting their call for regulatory clarity. Despite these calls clarity, Coinbase maintains the the SEC has instead opted ramp up efforts to regulate retrospectively through enforcement actions and even threatened Coinbase with such actions. Crypto Criminal Defense Lawyer Blog
Yet more than nine months (and counting) after Coinbase submitted its origi- nal petition, the SEC still has taken no action on Coinbase’s petition or provided any feedback on Coinbase’s proposals.24 Instead, it has ramped up efforts to regulate retrospectively by bringing enforcement actions—and has now threatened one against Coinbase. On March 22, 2023, the SEC served a Wells notice on Coinbase alleging (among other things) that unspecified portions of Coinbase’s listed digital assets are unregistered securities—even while the Commission still refuses to ad- dress Coinbase’s rulemaking petition asking the agency to open a path to registration for digital assets that the Commission believes to be securities. writ of mandamus
According to Coinbase’s filing, the SEC is statutorily required to respond to requests for rulemaking within a reasonable time, but has withheld a formal response to Coinbase's petition and argues this inaction effectively insulates the SEC's refusal to publish rules from the ordinary avenues of judicial review.
On April 14, 2023, the Commission reopened its exchange registration proposal, but that proposal does not appear to address any of the issues raised in Coinbase’s rulemaking petition. It does not address which digital assets the Commission believes to be securities and why, or how digital asset issuers and platforms could register with the SEC in order to list digital asset securities (including, for example, how to list digital asset securities alongside digital asset commodities). See SEC Press Release 2023-77, https://bit.ly/41oz9B9. writ of mandamus
The writ of mandamus is appropriate where an agency has defaulted on a clear, indisputable, and nondiscretionary duty. It is typically the remedy for agency delay and can ensure that an agency does not thwart courts' jurisdiction by withholding a reviewable decision. In this case, the Administrative Procedure Act (APA) requires the SEC to act on Coinbase's rulemaking petition within a reasonable time. However, Coinbase maintains the Commission's withholding of a judicially reviewable action, while signaling its intention not to undertake rulemaking, is unreasonable.
This blog post was prepared with the assistance of ChatGPT-4 AI. Nothing in this post should be considered legal advice or the creation of an attorney-client relationship. This blog is strictly for informational purposes only.