The US Securities and Exchange Commission has been instructed to provide a thorough explanation for its decision not to create regulations for the crypto industry, following a court ruling on Monday. A panel of three judges from the US Court of Appeals for the Third Circuit partially supported Coinbase's request for the agency to offer clearer guidelines on crypto assets. The judges stated that instead of forcing the agency to create a rule, they are ordering it to explain its decision not to do so, suggesting that a clear statement on crypto assets could be sufficient to address the issue. Judge Stephanos Bibas cautioned the SEC against providing another inadequate explanation, adding to the agency's recent series of poor justifications.
This legal setback for the SEC comes as Chair Gary Gensler prepares to step down, potentially paving the way for new leadership to reassess the agency's approach to crypto oversight. The ruling described the SEC's actions on crypto as 'arbitrary and capricious', echoing the language used by the D.C.
Circuit Court of Appeals in a previous case. While the court did not believe Coinbase's arguments justified demanding new rules from the regulator, it did grant the company's petition in part and ordered the SEC to provide a more complete explanation.
The SEC is reviewing the decision and will determine its next steps accordingly. Coinbase Chief Legal Officer Paul Grewal expressed appreciation for the court's consideration, as the company continues to navigate its ongoing court battles with the agency.