Coinbase scored a major legal victory yesterday in its ongoing fight with the U.S. Securities and Exchange Commission over crypto regulations. The U.S. Court of Appeals for the Third Circuit sided with Coinbase, rebuking the SEC’s denial of Coinbase’s request for clear digital asset rules as “arbitrary and capricious.”.
It was a part of the increasing list of court losses that the agency has faced regarding crypto-related cases, ordering the SEC to give a more detailed explanation for its denial. Coinbase initially sought guidance from the regulator in 2022, requesting clarification on when digital assets were considered securities—a fundamental question for the crypto industry.
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In 2023, the SEC rejected Coinbase’s petition on the basis of no need for specific rules. However, the court disagreed, labeling the SEC’s reasoning as insufficient and lacking detail. Judge Thomas Ambro called the SEC’s response “conclusory,” while SEC Judge Stephanos Bibas warned that the agency’s approach of strict enforcement without clear guidelines could harm the entire crypto sector.
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Although the ruling does not force the SEC to write new rules, it does force the agency to be more specific. Coinbase’s Chief Legal Officer, Paul Grewal, hailed the decision as a move toward ending the regulatory uncertainty that has dogged the crypto industry.
