Sept 23 (Reuters) - Coinbase 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.