Sept 23 (Reuters) – Coinbase (COIN.O, opens new tab and the U.S. securities regulator faced off in a federal appeals court in Philadelphia on Monday as the cryptocurrency exchange presses the agency to create new rules for digital assets.

Coinbase, the largest U.S. crypto exchange, sued the Securities and Exchange Commission last year in an effort to compel the regulator to act on a petition for rulemaking it filed in 2022.

In that petition, it 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 cryptocurrencies.

The SEC denied Coinbase’s petition for new rulemaking in December 2023, with the commission saying it would not propose new rules because it fundamentally disagreed that current regulations are “unworkable” for the crypto sector.

Coinbase on Monday asked a federal appeals court to overturn that denial, saying the SEC has made it impossible for the crypto firm to operate and comply with U.S. regulations.

The dispute is the latest in a broader tug-of-war between the crypto sector and the top U.S. markets regulator, which has repeatedly said most crypto tokens are securities and subject to its jurisdiction. The agency has sued several crypto companies, including Coinbase, for listing and trading crypto tokens which it says should be registered as securities.

Coinbase denies those allegations and is fighting them in a separate court case.

The crypto industry largely believes it operates in a regulatory gray area not governed by existing U.S. securities laws, and that new legislation is needed to regulate the sector.