Coinbase Tried to Rein in a Renegade SEC That’s Trying to Rein in a Renegade Industry

Should regulators get to determine the rules they enforce? To the extent that federal watchdogs — like the Securities and Exchange Commission (SEC) and Commodities Futures Trading Commission (CFTC) — enforce the law acting with executive authority, mostly adhere to legislation written by congressional lawmakers, and are kept in check by the court system, it’s reasonable to say some degree of autonomy is warranted.

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But when it comes to potentially novel technology and business practices, regulatory self-determination can impede a new and emerging industry’s ability to advance. Crypto proponents, for instance, think distributed, self-executing ledgers are disruptive enough (in a good way) to warrant bespoke rules. It’s old news that SEC Chair Gary Gensler disagrees.

Gensler has said repeatedly that 99.99999999% of crypto tokens are securities — his domain — and that the supposed innovations of blockchain are just new ways of doing old things. And so, Gensler has been applying existing rules and regulations to rein in an industry that has become a hotbed for fraud as well as financial experimentation.

Today is no different. In a new filing in the SEC’s ongoing legal imbroglio with Coinbase, the executive agency reaffirmed its stance that it has the “discretion to determine the timing and priorities of its regulatory agenda.” Gensler, in a press release, added that the current law “appropriately governs crypto asset securities.”

This filing came in response to Coinbase’s petition to the SEC in 2022 for new “rulemaking” tailored to blockchain, which turned into a lawsuit, filed by the largest U.S. exchange in 2023 after it didn’t hear back from the agency. Coinbase had asked a U.S. judge to force the SEC’s hand to write new rules or at the very least respond to the exchange’s petition.

So is the SEC’s response adequate? The agency said Coinbase’s ask was “unworkable,” but really doesn’t elaborate. In a two-pager, the SEC pointed out that it has “broad discretion” to act (citing a 2007 Supreme Court case, Massachusetts v. EPA), that it “benefits from engagement with market…