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Coinbase Wins Partial Victory Against SEC
In a significant development, Coinbase Global Inc., a prominent cryptocurrency exchange, has achieved a partial victory in its legal battle with the U.S. Securities and Exchange Commission (SEC). On January 13, 2025, the U.S. Court of Appeals for the Third Circuit delivered its verdict, ruling that the SEC’s rejection of Coinbase’s 2022 petition for crypto-specific regulations was “arbitrary and capricious.”
The dispute originated in 2022 when Coinbase formally requested the establishment of clear guidelines to determine which digital assets qualify as securities. This petition aimed to address widespread uncertainty within the crypto industry. The SEC denied Coinbase’s request in 2023 with a brief, two-page response, prompting Coinbase to file a legal appeal in the Third Circuit.
The court criticized the SEC’s rejection for lacking sufficient reasoning and deemed it “conclusory” and unsupported by evidence. Judge Thomas Ambro described the agency’s response as “insufficiently supported,” while Judge Stephanos Bibas emphasized that the approach could damage the entire industry. The judges refrained from mandating immediate rulemaking, explaining that such an order is justified only in cases where delays pose extreme risks.
Moreover, this ruling has implications for the SEC’s regulatory approach to the crypto market. The court’s decision criticizes the agency’s “regulation by enforcement” strategy, wherein it has pursued legal actions against major crypto companies, including Ripple Labs and Binance, rather than creating clear rules. Judge Bibas warned the SEC against using enforcement as a substitute for rulemaking, arguing that selective enforcement without clear guidelines risks undermining innovation and fairness.
Coinbase is also involved in another separate legal case with the SEC, which was filed in June 2023. In this case, the agency alleged that Coinbase operated as an unregistered securities exchange. This appeal is currently under consideration by the Second Circuit.
The decision comes amidst expected changes in SEC leadership. Gary Gensler, the current SEC Chair, is set to step down on January 20. His successor, Paul Atkins, is anticipated to adopt a more crypto-friendly approach, potentially reducing the agency’s reliance on enforcement actions.
Source: coinchapter.com
