The US Court of Appeals for the Third Circuit ruled in favor of Coinbase, criticizing the SEC’s denial of rulemaking.
The court called the SEC’s reasoning “arbitrary and capricious” and ordered a more detailed explanation.
Industry leaders supported the decision, highlighting concerns over the SEC’s approach to crypto regulation.
The US Court of Appeals for the Third Circuit recently issued a decision of first impression in the ongoing battle by Coinbase with the SEC. The court said the SEC’s denial of Coinbase’s rulemaking petition was “arbitrary and capricious.” It pressured the regulator into better explaining its actions. It has been considered a big victory for Coinbase and the broader cryptocurrency industry, long chafing under vague guidance from the SEC regarding digital assets.
Reactions from Coinbase Leaders
The Chief Legal Officer at Coinbase, Paul Grewal, welcomed the ruling. He celebrated the decision of the court via an X post. He scolded the SEC for issuing an order that was “conclusory and insufficiently reasoned.”
Grewal added that the concurrence by Judge Bibas also did much to question the constitutional consequences of how the SEC approaches enforcement. He added that the court was carefully rendering judgment in this landmark decision. It probably will have more far-reaching results for the regulatory ecosystem.
Brian Armstrong, chief executive of Coinbase, took to the case for reflection on what he learned from the case and how it earned him new respect for the American legal system. According to Armstrong, the process might have caused damage worth billions to the crypto industry. Yet, in the end, the judicial system played a deterrent against possible overreach by the government. He emphasized the protection of constitutional freedoms in an increasingly questionable SEC.
Ripple’s Support and Criticism of SEC’s Actions
Ripple’s Chief Legal Officer Stuart Alderoty also congratulated Grewal and Coinbase. While having a potshot at what he considers crypto-unfriendly securities regulation. He said the SEC’s decision not to take action against Coinbase is revealing of the “random and capricious” fashion in which securities laws are used against the crypto market. In other words, Alderoty believes that what the SEC really wants is an effective ban on this industry.
Faryar Shirzad, Coinbase’s Chief Policy Officer, also expressed these sentiments. He referred to how the SEC has treated digital assets under Gensler’s regime as a “catastrophe.” He hailed the legal team for their good work that resulted in this judgment and wished for a more transparent and fair environment regarding regulation in the crypto sphere.
According to Shirzad, this ruling provides a roadmap that the next leadership at the SEC will use to bring clarity to the markets. The decision is a turning point in the fight over cryptocurrency regulation and could have wide-ranging implications for how the SEC approaches digital assets going forward.
