Coinbase has made a final appeal to an appellate court, urging the U.S. Securities and Exchange Commission (SEC) to begin drafting regulations specifically for the cryptocurrency industry. In a 36-page closing brief filed on Friday with the Court of Appeals for the Third Circuit, Coinbase argued that the SEC's current approach is detrimental to the crypto sector.

Coinbase contends that crypto firms are ensnared in a "Catch-22" scenario. The SEC has demanded compliance from these firms while simultaneously initiating aggressive litigation against those deemed non-compliant. Despite these demands, the SEC has not provided clear regulatory guidelines, which Coinbase views as an intentional effort to undermine the industry.

"This pattern of conduct is a purposeful effort to destroy an industry by demanding the impossible and prosecuting companies that fail to achieve it," Coinbase stated in its brief.

Coinbase also criticized the SEC for its alleged inconsistency regarding digital assets. The exchange pointed out that the SEC claims its position on digital assets remains unchanged, yet it has only offered vague statements that regulatory application depends on "facts and circumstances."

The SEC has resisted Coinbase's push for rulemaking, arguing earlier this month that the exchange cannot compel the agency to create new regulations. The SEC maintains that existing regulations are sufficient and that the call for new rules is unwarranted.

The struggle between Coinbase and the SEC over the need for crypto-specific regulations has persisted for years. Coinbase first requested a formal rulemaking process from the SEC in July 2022 to provide clearer guidance for the industry. While the SEC has not introduced specific regulations for cryptocurrencies, it has proposed related rules, such as revisiting a custody rule that requires registered investment advisors to store crypto assets with a qualified custodian adhering to specific standards. Coinbase criticized these rules as "ill-fitting" for the crypto industry.

Over the past year, the SEC has taken enforcement actions against several crypto platforms and projects. Notably, the agency sued Coinbase in June for allegedly operating its platform without proper registration. The crypto industry has frequently accused the SEC of "regulation by enforcement," a term used to describe the agency's approach of imposing regulations through legal actions rather than clear guidelines. SEC Chair Gary Gensler has maintained that most cryptocurrencies are securities and should be regulated accordingly.

In April 2023, Coinbase sued the SEC to force the agency to respond to its rulemaking petition. The SEC subsequently denied the request for new rules, with Chair Gensler asserting that existing regulations are already applicable to crypto. Gensler emphasized that part of the SEC's responsibility is to allocate its resources effectively, noting that the crypto market is relatively small compared to the broader capital markets the agency oversees.

The SEC has declined to comment on the ongoing legal proceedings.