Third Circuit Court Rules SEC's Denial of Coinbase Petition 'Arbitrary and Capricious'

Coinbase has secured a partial victory against the U.S. Securities and Exchange Commission (SEC) in the Third Circuit Court of Appeals. The court found that the SEC's denial of Coinbase's 2022 petition for clearer cryptocurrency regulations was "conclusory and insufficiently reasoned, and thus arbitrary and capricious."

The court ordered the SEC to provide a more thorough explanation of its decision and to reconsider Coinbase's petition for rulemaking. The ruling emphasized that the SEC's lack of clear guidance harms crypto companies trying to comply with the law, stating that "sporadically enforcing ill-fitting rules against crypto companies that are trying to follow the law goes way beyond fighting fraud."

Legal experts noted that this is the second time a federal court has found the SEC's actions "arbitrary and capricious," following a similar judgment in the Grayscale case. The decision highlights ongoing concerns about the SEC's "regulation-by-enforcement" approach toward the crypto industry.

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