In a surprising twist, the U.S. Chamber of Commerce has taken up arms in the digital asset battlefield.
According to a report by The Block, the influential business advocacy group has thrown its weight behind Coinbase and other critics of U.S. regulation in the digital asset industry, particularly concerning the U.S. Securities and Exchange Commission’s (SEC) stance.
The Chamber of Commerce has expressed support for Coinbase’s lawsuit against the SEC in response to a request for crypto-specific rulemaking. On 24 April 2023, Paul Grewal, Coinbase’s Chief Legal Officer, detailed in a blog post that Coinbase had filed a narrow action in federal court, compelling the SEC to provide a yes or no response to their July 2022 petition, which requested formal rulemaking guidance for the crypto sector.
On 24 April 2023, Coinbase filed a Petition for Writ of Mandamus with the U.S. Court of Appeals for the Third Circuit. The petition is aimed at urging the Securities and Exchange Commission (SEC) to take action on Coinbase’s pending rulemaking petition. The goal? To seek much-needed clarity for the rapidly growing crypto market.
Eugene Scalia, Counsel for Coinbase, penned a compelling argument, emphasizing the situation’s urgency. In the petition, Coinbase requests a writ that would require the SEC to respond to their rulemaking petition promptly. It’s important to note that Coinbase is not seeking to dictate the agency’s response but rather seeks an official acknowledgment of its petition.
Scalia highlighted the SEC’s repeated indications that it has already decided to deny the petition, raising concerns about the agency’s delay in formally announcing its decision. This delay, according to Coinbase, not only hampers progress but also impedes the crucial judicial review that the industry desperately needs.
The Chamber of Commerce, in its court filing backing the suit, argues that the SEC’s silence in response to Coinbase’s request “is causing substantial economic harm to both Coinbase and the broader business community.”
Further, the association has taken issue with the SEC’s enforcement action against Kraken’s staking-as-a-service business. Although Kraken has since settled and ceased this business line in the U.S., the Chamber criticizes this action as indicative of an overly aggressive SEC enforcement posture that could compel more digital asset firms to terminate offerings in the U.S.
The business group also lambasts the uncertainty surrounding Ether, the second-largest cryptocurrency by market capitalization. The Chamber’s brief argues:
“Ether has been around for almost a decade, has a market capitalization exceeding $220 billion, and is a fundamental building block in the industry. Yet despite the ubiquity of ether, regulators still cannot agree on what it is.“
This brief also observes the shift in tone around Ether from the SEC, the agency’s disagreement with the Commodity Futures Trading Commission (CFTC) over the digital asset, and Gensler’s recent lack of clarity before Congress and to reporters afterward over whether Ether is a security or not.
Moreover, the amicus brief filed on Tuesday (9 May 2023) echoes an argument in Coinbase’s suit, alleging that the SEC has already decided whether to issue a rule but refused to respond to the request formally. This accusation stems from Gensler’s public statements indicating that existing financial markets laws are sufficient to regulate digital assets.
As The Block’s report points out, Coinbase can challenge the agency’s decision in court, which could be a lengthy process. However, the company has chosen to risk the preemptive lawsuit against the SEC now, opting to battle on its terms rather than waiting to see if an investigation into several of its business lines would result in an enforcement action.
