The U.S. Securities and Exchange Commission was ordered to respond to a complaint from crypto exchange Coinbase within the next 10 days, a court ruled on Wednesday.
Coinbase filed a lawsuit to force the watchdog to clarify how it interprets and applies securities laws to the cryptocurrency industry.
The ruling is the latest development in an ongoing showdown between crypto businesses in the U.S. and financial watchdogs.
On Wednesday, a U.S. court ordered the Securities and Exchange Commission to answer a lawsuit regarding how the watchdog applies federal laws to the nascent digital asset industry and cryptocurrencies.
The complaint in question was filed by crypto exchange Coinbase after the SEC issued a Wells notice to the company. Indeed, the regulator alleged a “possible violation of securities laws” by Coinbase.
In response, Coinbase sued the regulator for opting to reign in the crypto industry through enforcement actions rather than providing sufficient guidance and compliance guidelines.
Coinbase cited a petition from 2022 that asked the watchdog to provide official rules for the crypto industry. Gary Gensler’s commission is yet to address the petition. Instead, the regulator has cracked down on crypto entities like Binance, Coinbase, and Kraken for allegedly breaking existing securities laws.
The regulator now has 10 days to respond to Coinbase’s suit following the court ruling on Wednesday. Also, the crypto exchange may submit a reply seven days after the regulator files.
SEC Enforcement Actions
The watchdog has continuously maintained that the crypto industry remains a threat to U.S. financial stability. While likening crypto to the “wild wild west” and insisting that existing securities laws provide sufficient oversight, the regulator has also undertaken several enforcement actions against crypto businesses.
Crypto proponents speculated that the latest round of enforcement actions is part of a called “operation chokepoint 2.0”, a joint initiative between state and federal regulators meant to boot out crypto and digital asset staking services from America.
Coinbase was accused of violating securities laws in March. Crypto trust company Paxos also received a Wells notice from the watchdog over alleged violations. Binance was embroiled in a legal sparring match with the commission over a $1 billion deal to buy Voyager assets.
Some businesses like Kraken were fined and forced to completely shut down some of their on-shore services.