The Securities and Exchange Commission (SEC) has rejected cryptocurrency exchange Coinbase’s request for tailored regulations for digital assets. In a two-page response, the SEC stated that the requested rulemaking was currently unwarranted and denied Coinbase’s petition. SEC Chair Gary Gensler emphasized that the regulator already possesses sufficient authority under existing statutes to govern crypto asset securities and address wrongdoing in the nascent industry.

Coinbase had formally petitioned the SEC in 2022 for specialized crypto regulations, distinct from traditional securities regulations, arguing that fitting digital assets into conventional securities law would stifle innovation in the crypto sector. The SEC’s refusal is a setback for Coinbase, which had taken the agency to court to compel a response to its rulemaking petition.

The SEC disagreed with the notion that established securities laws are unsuitable for crypto asset securities, asserting that it has been proposing rules to directly regulate crypto market participants. Gensler highlighted the SEC’s discretion in setting rulemaking priorities based on broad public interest and noted that a crypto broker-dealer, Prometheum, successfully registered with the regulator by following existing laws.

The SEC’s rejection underscores the adversarial relationship between the regulator and players like Coinbase. Earlier this year, the SEC sued Coinbase for allegedly operating an unregistered cryptocurrency exchange. Crypto businesses are growing frustrated with the lack of clear rules tailored to digital asset activities, as the SEC’s inflexible approach to applying antiquated securities law to crypto inhibits advancements and drives activity to more welcoming jurisdictions. Advocates argue that the unique nature of digital assets warrants updated rules to encourage American crypto companies to grow domestically. The SEC’s insistence on applying traditional securities statutes to crypto leaves the industry facing continued uncertainty unless lawmakers intervene to spur crypto regulation action.