The Crypto Council filed an amicus brief in the Third Circuit in support of Coinbase challenging the SEC’s denial of its rulemaking petition. The SEC’s pursuit of its flawed interpretation of securities laws through regulation by enforcement while refusing to engage in rulemaking is a violation of the Administrative Procedure Act (APA) and will continue to cause significant harm to the digital assets industry.

As further detailed in our amicus brief, the SEC has attempted to enshrine an arbitrary and baseless enforcement policy without giving interested parties an opportunity to contribute meaningfully to the rules the SEC now claims governs their actions. This results in good actors forced to decipher the SEC’s evolving views based on public statements by officials, litigation filings, and (sometimes contradictory) judicial rulings in enforcement actions.

The SEC’s refusal to engage in substantive rulemaking perpetuates an unworkable regulatory blackhole, which fails to provide a viable path to compliance for the digital assets industry.

In turn, industry participants are fleeing abroad to countries that offer the needed regulatory guidance. And the U.S. is losing its role as a leader in the global digital assets financial system, unfortunately taking a back seat as other countries embark toward the technological frontier. This will deprive American consumers of access to digital assets, their diversification, decentralization, and manifold benefits.

CCI’s brief also details the fact that the SEC, in its order denying the rulemaking request, wrote a single sentence regarding the alleged “effectiveness” of the current system. This statement was devoid of any meaningful detail or reasoning. Such failure to engage is arbitrary and capricious and constitutes a violation of the APA, which requires much more.

The first Chair of the SEC made a promise: “If a business does the right thing, it will be protected and given a chance to live, make profits and grow. . . Honest business needs nothing more; the [SEC] promises nothing less.” When it comes to digital assets, the SEC has unfortunately failed in that promise.

Source: Crypto Council