Court Orders SEC to Justify Rejection of Coinbase's Crypto Rulemaking Petition

A federal appeals court calls the SEC's denial of Coinbase's request for clear crypto regulations 'arbitrary and capricious' but stops short of requiring new rules.

The U.S. Court of Appeals for the Third Circuit ruled that the SEC must provide a detailed explanation for its rejection of Coinbase’s 2022 petition for crypto-specific rules.
The court described the SEC’s refusal as 'arbitrary and capricious' but declined to mandate the creation of new regulations for digital assets.
Judge Stephanos Bibas criticized the SEC’s approach, warning against 'sporadically enforcing ill-fitting rules' that could harm the crypto industry.
Coinbase has accused the SEC of using enforcement actions to target the industry rather than providing clear guidance, a practice critics call 'regulation by enforcement.'
The decision comes just days before SEC Chair Gary Gensler’s resignation, with incoming leadership expected to potentially shift the agency’s stance on crypto oversight.