SEC denies rulemaking petition filed by Coinbase

• The Securities and Exchange Commission (SEC) has denied the rulemaking petition filed by Coinbase.
• SEC Chair Gary Gensler says current laws enough for investor proections.
• Commissioners Hester Peirce and Mark Uyeda have released a statement disagreeing with the Commission’s decision.

The Securities and Exchange Commission (SEC) has denied a crypto rulemaking petition filed by US-based crypto exchange Coinbase.

SEC Chair Gary Gensler said in a statement published on Friday that he supports the Commission’s decision. He cited three reasons for his outlook on the agency’s latest course of action in relation to the quest for clear regulatory rules.

“I was pleased to support the Commission’s decision for three reasons,” Gensler stated. 

“First, existing laws and regulations apply to the crypto securities markets. Second, the SEC addresses the crypto securities markets through rulemaking as well. Third, it is important to maintain Commission discretion in setting its own rulemaking priorities.”

Gensler says current laws apply to crypto

The SEC Chair’s comments, on the back of the government agency’s push back against new tailor-made crypto rules, follows recent enforcement actions and lawsuits against major crypto companies and players for alleged securities violations. 

These include Coinbase, Binance and Kraken among others.

Meanwhile, the industry, in the wake of the collapse of crypto exchange FTX, has accused the SEC of doing nothing to protect investors amid its crackdown on exchanges. But Gensler says the existing laws are sufficient for investor and industry players’ protection.

“There is nothing about the crypto securities markets that suggests that investors and issuers are less deserving of the protections of our securities laws. Congress could have said in 1933 or in 1934 that the securities laws applied only to stocks and bonds. Instead, Congress included a long list of 30-plus items in the definition of a security, including the term “investment contract”,” the SEC Chair noted.

Gensler has maintained that most crypto assets are investment contracts and therefore subject to federal securities laws. This year, a US court declared that XRP, which the Commission alleged to be a security, was not. But despite the legal losses against Ripple, subsequent lawsuits by the watchdog have listed multiple tokens as unregistered securities.

Noting that the SEC’s rulemaking as it addresses crypto securities, Gensler said he disagrees with Coinbase’s assertion that “now is the right time” for a change to the rulemaking.

According to the SEC Chair, several crypto-related cases and undertakings are underway and results of these could inform whether or not a change to the regulatory regime is needed.

In a separate statement, SEC Commissioners Hester Peirce and Mark Uyeda said they “disagree with the Commission’s decision.” 

Commissioner Uyeda and I responded to today’s denial of Coinbase’s rulemaking petition: https://t.co/uBC9Bujhqd

— Hester Peirce (@HesterPeirce) December 15, 2023

The two Commissioners note that the petition raises key issues related to new technologies and that addressing them is “a core part of being a responsible regulator.”