The U.S. Securities and Exchange Commission (SEC) has denied a Petition for Rulemaking filed by Coinbase Global, which is aimed at altering the regulatory landscape for crypto securities markets. Chair Gary Gensler, in a press release, outlined three key reasons supporting the Commission’s decision.
SEC’s Response To Coinbase’s Claims
Firstly, Gensler emphasized that existing laws and regulations already apply to crypto securities markets. The definition of a security, established by Congress in 1933 and 1934, is broad and includes various forms of financial instruments, ensuring that investors and issuers are entitled to the same protections as traditional securities.
Gensler referred to landmark Supreme Court decisions, particularly SEC v. W.J. Howey Co., which defines an investment contract as the investment of money in a common enterprise with a reasonable expectation of profits derived from the efforts of others. This flexible principle has been successfully applied to various investment forms, including crypto assets, with federal courts consistently upholding the applicability of securities laws.
The second point addressed the SEC’s commitment to addressing crypto securities markets through rulemaking. Gensler contested the petitioner’s claim that the current regulatory landscape was unsuitable, highlighting ongoing initiatives and proposals, such as the Special Purpose Broker-Dealers Release and various rule proposals applicable to crypto asset securities.
Finally, Gensler stressed the importance of maintaining Commission discretion in setting its rulemaking priorities. With the crypto market representing a fraction of the broader capital markets, the SEC asserted the need to focus on areas requiring updated regulation, underscoring the Commission’s role in deploying resources efficiently.
Gensler expresses a willingness to engage with crypto projects and intermediaries committed to compliance. He reinforces the necessity of registration and compliance, asserting that these measures ensure investors receive comprehensive and truthful disclosures. However, the SEC’s decision to deny the petition aligns with Gensler’s belief that the existing securities regime appropriately governs crypto asset securities, safeguarding the investing public’s interests.
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