Coinbase has urged a federal appeals court in Philadelphia on Monday to pressurise the US Securities and Exchange Commission (SEC) to create new crypto rules.
Coinbase appealed to the court, that the SEC had made it impossible for it to operate and comply with regulations.
According to a Reuters report, Eugene Scalia, a lawyer for Coinbase, said the SEC had been “arbitrary and capricious.” The regulator has not been giving Coinbase clarity on how to register and comply with U.S. laws, Scalia added.
Coinbase sued the SEC last year, demanding rules that clarify standards for determining when cryptos are securities. However, the SEC denied its claims in December, disagreeing that the current crypto regulations are “unworkable.”
On Monday, Scalia told a three-judge panel that the securities regulator provided “zero explanation” for denying Coinbase’s claims last year. Instead, the regulator has brought a slew of cases against crypto service providers with enforcement actions, the lawyer noted.
“It’s not the industry that is thrusting this priority on the agency, it’s the agency that seized it.”
US SEC Under Scrutiny
Ezekiel Hill, a lawyer for the SEC, argued that the agency already has sufficient regulations and is not required to create new crypto rules. Further, he noted that the case does not present any rare circumstances that could warrant such “extraordinary remedy.”
“If Coinbase wants to arrange its business in a way that does not comply with the existing regulatory framework, that does not establish a right to have the framework adapted to meet their business,” Hill said.
One of the judges questioned the SEC, saying that crypto participants have “serious concerns” about how they could comply. If proper regulations are unknown, they could be penalized for non-compliance.
However, Hill replied that the commission has followed the Howey test based on the US Supreme Court guidance, Bloomberg reported.
“The digital asset is not a security,” Hill said. “The digital asset can be the subject of an investment contract.” Meanwhile, critics have argued that the SEC has failed to establish a clear regulatory framework for cryptocurrencies. As a result, an alliance of seven US states has come together to challenge the regulator over crypto regulatory clarity.
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