{"id":210,"date":"2025-01-16T10:38:06","date_gmt":"2025-01-16T14:38:06","guid":{"rendered":"https:\/\/blogs.duanemorris.com\/fintech\/?p=210"},"modified":"2025-03-28T14:38:36","modified_gmt":"2025-03-28T18:38:36","slug":"coinbase-wins-another-partial-victory-in-its-battle-for-clarity-on-crytpo-regulation","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/fintech\/2025\/01\/16\/coinbase-wins-another-partial-victory-in-its-battle-for-clarity-on-crytpo-regulation\/","title":{"rendered":"Coinbase Wins Another Partial Victory in its Battle for Clarity on Crytpo Regulation"},"content":{"rendered":"\n

By Sheila Raftery Wiggin<\/a>s and Vincent J. Nolan III<\/a><\/em><\/p>\n\n\n\n

Following its win in the Southern District of New York (SDNY) last week pausing the Securities and Exchange Commission\u2019s (SEC) enforcement suit against it (see our recent blog post on the decision here<\/a>), Coinbase, Inc. has won another partial victory in the Third Circuit Court of Appeals. This time, Coinbase successfully petitioned the Third Circuit to require the SEC to explain to Coinbase the reasons why it will not engage in crypto rulemaking.  <\/p>\n\n\n\n

Over the last several years, the crypto community has been very critical of the SEC\u2019s enforcement by litigation approach, arguing that more clarity was needed on how to comply with the law. In July 2022, Coinbase filed a petition with the SEC, seeking to force the agency to engage in rulemaking and promulgate new rules clarifying how and when digital assets qualify as securities under existing federal securities laws. After some skirmishing in the Third Circuit over the timing of the SEC\u2019s response, in December 2023, the SEC denied Coinbase\u2019s rulemaking petition.<\/p>\n\n\n\n

The SEC\u2019s written denial was short, its reasoning contained in a single paragraph. It alluded to three bases for its decision: (1) it disagreed with Coinbase\u2019s concerns (as set forth in the rulemaking petition) that application of existing securities law to the crypto environment was \u201cunworkable;\u201d (2) the SEC had other priorities; and (3) the SEC preferred to proceed incrementally.<\/p>\n\n\n\n

While the SEC \u201csuggested\u201d these The Third Circuit found the SEC\u2019s order \u201cconclusory and insufficiently reasoned\u201d and therefore in violation of the procedures under the Administrative Procedures Act. The court noted that any of the three grounds asserted in the SEC\u2019s decision \u201ccould be sound and independently sufficient bases for denying a rulemaking petition.\u201d  But the SEC was required to provide more than conclusory statements and had to explain its reasoning to demonstrate that \u201cits decision considered all important aspects presented by the petition and resulted from reasoned decision making.\u201d <\/p>\n\n\n\n

As a result, the Third Circuit granted Coinbase\u2019s petition in part and remanded the matter to the SEC for a more complete explanation of the basis for the denial of the rulemaking petition.<\/p>\n\n\n\n

The victory is only partial, however. Coinbase had also asked the Third Circuit to require<\/em> the SEC to engage in rulemaking. The court declined to order the agency to institute rulemaking proceedings, finding that this was not the \u201cextreme situation\u201d that would warrant the \u201cextraordinary remedy\u201d of a court forcing an administrative agency to engage in rulemaking.  <\/p>\n\n\n\n

While the judges in the appellate panel were in agreement on the decision, there was some disagreement as to Coinbase\u2019s argument that it had been denied fair notice and due process.  Judge Stephanos Bibas, who joined the majority opinion, filed an interesting concurring opinion to address what he saw as a constitutional issue that is \u201cnot yet teed up,\u201d but is waiting in the wings. Based on the due process principle that regulated parties should know what is required of them so they may act accordingly, Judge Bibas found that the SEC \u201crepeatedly sues crypto companies,\u201d yet \u201cwill not tell them how to comply\u201d with the law. \u201c[T]hat caginess,\u201d according to Judge Bibas, \u201ccreates a serious constitutional problem; due process guarantees fair notice.\u201d   <\/p>\n\n\n\n

While neither the decision itself nor Judge Bibas\u2019 concurrence bring the clarity ultimately sought by the crypto community, the Third Circuit\u2019s decision to require the SEC to explain its denial of Coinbase\u2019s crypto rulemaking petition, coupled with last week\u2019s decision by the SDNY to pause the SEC\u2019s enforcement suit against Coinbase to allow the Second Circuit to opine on the SEC\u2019s application of the securities laws to digital assets, ensure that these issues will now be addressed during and most likely by the Trump administration, which has promised to create a crypto-friendly environment.<\/p>\n\n\n\n

Disclaimer:<\/strong> The content provided is for informational purposes only and does not constitute financial, investment, or legal advice. While our law firm has substantial experience in cryptocurrency law and regulation, we do not offer investment advice or opinions on cryptocurrency as an investment. Consult a financial advisor before investing.<\/p>\n\n\n\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

By Sheila Raftery Wiggins and Vincent J. Nolan III Following its win in the Southern District of New York (SDNY) last week pausing the Securities and Exchange Commission\u2019s (SEC) enforcement suit against it (see our recent blog post on the decision here), Coinbase, Inc. has won another partial victory in the Third Circuit Court of … <\/p>\n

Continue reading “Coinbase Wins Another Partial Victory in its Battle for Clarity on Crytpo Regulation”<\/span><\/a><\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[65,30,17,69],"ppma_author":[12],"class_list":["post-210","post","type-post","status-publish","format-standard","hentry","category-general","tag-crypto","tag-cryptocurrency","tag-sec","tag-vincent-nolan"],"authors":[{"term_id":12,"user_id":6,"is_guest":0,"slug":"duanemorris3","display_name":"Duane Morris","avatar_url":"https:\/\/secure.gravatar.com\/avatar\/843ff6e7a8fe5fc92109b47a45f34b6cf0ea499e6e788db23456c838b0ae6747?s=96&d=blank&r=g","0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":"","8":""}],"_links":{"self":[{"href":"https:\/\/blogs.duanemorris.com\/fintech\/wp-json\/wp\/v2\/posts\/210","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.duanemorris.com\/fintech\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.duanemorris.com\/fintech\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/fintech\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/fintech\/wp-json\/wp\/v2\/comments?post=210"}],"version-history":[{"count":0,"href":"https:\/\/blogs.duanemorris.com\/fintech\/wp-json\/wp\/v2\/posts\/210\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.duanemorris.com\/fintech\/wp-json\/wp\/v2\/media?parent=210"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/fintech\/wp-json\/wp\/v2\/categories?post=210"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/fintech\/wp-json\/wp\/v2\/tags?post=210"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/fintech\/wp-json\/wp\/v2\/ppma_author?post=210"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}