- Gensler is being pressed to explain his denial of Coinbase’s request for crypto-specific regulations
- The U.S. Court of Appeals has demanded the SEC provide a clearer explanation
- This could be the last major challenge for Gensler before Trump takes office and appoints a new SEC Chair
Heading to its final week on the job, Securities and Exchange Commission Chair Gary Gensler is being pressed to explain why he denied Coinbase‘s request for crypto-specific regulations. A three-judge panel in the U.S. Court of Appeals requested the motion, demanding the SEC to explain its reasoning for denying Coinbase’s request.
To better understand the potential effect of this most recent legal development, let’s dive into how these developments came to unfold.
Coinbase’s Request
One of the largest cryptocurrency exchanges in the world, Coinbase originally filed a petition with the SEC in 2022, requesting crypto-specific regulations for digital assets, as in its point of view, these types of assets differ from traditional investments.
The crypto firm also requested a better explanation of whether cryptocurrencies should be considered securities, arguing that the current securities laws do not encompass the intricacies and uniqueness of digital assets. Coinbase also argued that a clearer guideline would help the crypto sector in reducing legal uncertainty and quickly adapt to the U.S. regulatory framework.
SEC’s Argument to Deny the Request
Viewed by many as a vague and unsatisfactory response, the SEC’s rebuttal to Coinbase’s request came in the form of a two-page letter that basically reaffirmed that the Commission had the authority to regulate digital assets under the current securities laws.
The overall motto during Gensler’s reign as SEC chair was that pretty much all cryptocurrency, (excluding Bitcoin), should be classified as securities due to its characteristics as “investment contracts”.
Court of Appeals Response
Moving back into the most recent development, the U.S. Court of Appeals ruled in favor of Coinbase.
The ruling mentions that the “SEC’s order was conclusory and insufficiently reasoned,” coming to the point of calling the Commission’s response “arbitrary and capricious.” The Court later granted Coinbase’s petition and requested the SEC to provide a more complete explanation of the case.
This most recent development could prove the last “loss” of Gensler’s SEC. The court gave the commission up until January 20th—the last day Gesnler will spend in office—to provide the explanation.
Donald Trump will be taking office as the new U.S. President on Jan 20th—and with him the new SEC Chair appointed by the Republican, Paul Atkins. The crypto sector expects to see a much more friendly SEC head in Atkins,
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