According to a Dec. 15 release, the U.S. Securities and Exchange Commission has rejected Coinbase’s request for transparent crypto rules.
This follows Coinbase’s filing of a narrow action in federal court that would compel the U.S. Securities and Exchange Commission (SEC) to respond yes or no to a July 2022 petition asking the SEC to use its formal rulemaking process.
Regulating investments by any name
On Dec. 15, Chairman Gary Gensler announced the SEC’s denial of Coinbase’s Rulemaking Petition, citing three reasons: existing laws already apply to crypto securities markets, the SEC addresses crypto securities markets through rulemaking, and the need to preserve Commission discretion in establishing rulemaking priorities.
The statement highlights the principles outlined in Howey and Reves, which have effectively guided analyses across diverse investment types for decades and prioritize the economic substance of transactions over labels or forms.
Gensler adds that over the years, federal courts have consistently applied these Supreme Court precedents to various crypto assets, with no court deeming these standards impractical for evaluating a crypto asset’s specific facts and circumstances.
Gensler wants to work with crypto
Gensler concludes that, unlike community comments that suggest he is against innovation, he stands on the side of compliance.
“As I said prior to the collapse of one of the largest non-compliant crypto intermediaries that cost investors billions of dollars, meaningful engagement with the SEC is always welcome,” Gensler says in the statement’s conclusion. “I look forward to working with crypto projects and intermediaries that wish to comply with the law.”
In response to the release, Commissioners Hester Peirce and Mark Uyeda said that while they are disappointed that the Commission is not hosting these conversations, they will have an open ear for conversations and other emerging ideas.
