Jake Chervinsky, chief legal officer of cryptocurrency-centered venture capital firm Variant Fund, has stated that the Securities and Exchange Commission has been "roasted" before the Court of Appeals for the Third Circuit.

"It's past time to put an end to the SEC's unlawful campaign of regulation by enforcement. The Third Circuit might do it," he said.

On Tuesday, cryptocurrency exchange Coinbase made oral arguments before the Third Circuit in its case against the SEC. The company took aim at the regulator's "arbitrary" and "capricious" denial of the company's petition for rulemaking. 

The appeals court judges reportedly grilled the SEC over its refusal to make digital assets one of its rulemaking priorities.  

Paul Grewal, chief legal officer at Coinbase, claims that the SEC has failed to come up with a "reasonable explanation" for its denial. "Regulation by enforcement does nothing but damage American consumers, innovation, US competitiveness, and our national security," he stressed. 

It is worth noting that it is still unclear how the panel will rule. However, according to WSJ reporter Dave Michaels, the SEC had tougher questions for the SEC than for the exchange.