Coinbase filed a writ of mandamus in response to the SEC on Tuesday.
“Mandamus is the tailor-made remedy for the extraordinary facts presented here,” Chief Legal Officer Paul Agrawal tweeted on Wednesday, linking to the filing in the process.
“[The SEC] has demonstrated its intent to continue its enforcement campaign against the crypto industry on the very topics raised by Coinbase’s petition, while ignoring that petition as it has done for years with other digital-asset-related rulemaking petitions,” Coinbase said in its filing.
If the SEC chooses to deny Coinbase’s petition, it could still be required by mandamus — defined in the US as a court order to ensure a government body comply with certain requests — to decide on digital asset regulation.
A mandamus order from a court, according to Cornell Law School, requires a government official to “properly fulfill their official duties or correct an abuse of discretion.”
Coinbase takes issue with the SEC’s alleged lack of action through both its failure to inform Coinbase of digital asset regulation when the exchange initially asked for clearer rules, to the agency’s response to the court when pressed to answer Coinbase’s request.
“The SEC also does not deny that its current enforcement campaign marks a significant departure from its prior views of the securities laws’ applicability to digital assets. Instead, it claims authority to bring enforcement actions against the industry indefinitely for violations of new standards never disclosed,” Coinbase said in its brief.
Even if the petition made by Coinbase is thrown out, the exchange argues that the court should continue to monitor the SEC, further pushing the commission to make progress on its rulemaking.
Should the court pursue a writ of mandamus, the SEC would be given seven days to respond.
Coinbase said that the court could also “order the SEC to explain its delay to date, state when it will respond, and provide progress reports” to the court.
Coinbase’s APA argument
The exchange claims the lack of response from the SEC on its petition prevents “effectively” — if not “formally” — Coinbase “from exercising its right under the Administrative Procedure Act to challenge the commission’s decision — or lack thereof — on rulemaking.
The APA “governs the process by which federal agencies develop and issue regulations,” according to the EPA’s website.
Coinbase sued the SEC in a bid to demand regulatory clarity back in April after the exchange was issued a Wells Notice by the agency.
The SEC was forced by the court to respond to Coinbase, to which the commission said that “no statute or regulation requires the Commission to take such action on a specific timeline.”
“Deliberating over the kind of significant changes sought by Coinbase, which could affect both crypto assets and the securities markets more generally, takes time—including, as here, time to weigh whether or not to initiate a rulemaking proceeding about such topics in the first instance. This is particularly true given the Commission’s active regulatory and enforcement agenda in this area,” the agency said.
Coinbase did not immediately respond to a request for comment.
Updated May 23, 2023 at 11:58 pm ET: Added details of Coinbase’s legal argument against the SEC, including the exchange’s allegations made against the regulator via the Administrative Procedure Act.
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