On April 24, 2023, Coinbase Global Inc. (Coinbase) filed a petition for writ of mandamus to the SEC in the US Court of Appeals for the Third Circuit (court) in an effort to compel the SEC to act on Coinbase’s previous rulemaking petition filed on July 21, 2022 to create new rules for digital assets and provide clarity for the crypto industry (see Article, Overview of Proposed Coinbase US Crypto Regulatory Framework).

Also on April 24, 2023, the chief legal officer (CLO) of Coinbase published a public blog post reporting that:

In the still pending Coinbase petition for rulemaking, Coinbase urged the SEC to provide clarity on the circumstances under which a digital asset is a security and create a new market structure framework that is compatible with cryptocurrency. According to the blog post, to date, more than 1,700 entities and individuals have submitted comments to Coinbase’s petition on the SEC website echoing the Coinbase request for clarity.

The mandamus petition alleges that Coinbase has followed up repeatedly with more specific suggestions for the SEC to consider in connection with the Coinbase rulemaking petition but the SEC has not responded. Instead, the mandamus petition alleges that:

According to the blog post, the Administrative Procedure Act (APA) requires the SEC to respond to Coinbase’s rulemaking petition "within a reasonable time." Coinbase asserts that if the SEC denies the Coinbase rulemaking petition, which Coinbase recognizes the SEC has the right to do, then Coinbase would be allowed to challenge that SEC decision in court and to explain why rulemaking is required.

The Coinbase mandamus petition alleges that the SEC’s refusal to respond to Coinbase’s rulemaking petition is, in the parlance of the APA, "agency action" that has been "unreasonably delayed" (5 U.S.C. § 706(1)).

According to the blog post, Coinbase understands the SEC’s public statements and enforcement activity in the crypto industry to mean that the SEC has already decided to deny Coinbase's rulemaking petition, but the SEC has yet to make this information public. According to the blog post, the Coinbase mandamus action simply requests that the court require the SEC to publicly share its decision on the Coinbase rulemaking petition.

The blog post observes that the Coinbase mandamus action may appear unusual, and notes that it is, because this action is usually not needed to obtain a regulatory reply to a formal petition. The blog post observes that Coinbase and other crypto businesses are facing potential regulatory enforcement action from the SEC even though the SEC has not provided regulatory clarity regarding how the law applies to their crypto businesses. Coinbase posits that the rulemaking process is a critical step to giving the public notice about what activities crypto companies may and may not engage in.

Update: On May 3, 2023, the court issued a text-only order directing the SEC to file a responsive answer to the Coinbase writ of mandamus petition within ten days of the date of the order. The court also gave Coinbase seven days to submit a reply to the SEC answer.

Update: On May 15, 2023 the SEC filed a requesting the court deny the Coinbase petition for mandamus for two reasons:

Update: On May 22, 2023 Coinbase filed a to the SEC brief, in which Coinbase asserts that the court should either:

For information on SEC regulation of crypto asset securities, including details of important enforcement actions to date, see Practice Note, SEC Regulation of Digital Assets: FinHub Framework for Analyzing Offer and Sale of Digital Assets.