Cryptocurrency exchange Coinbase Global Inc. (COIN  ) secured a partial victory against the Securities and Exchange Commission when a federal appeals court ruled the agency's denial of crypto rulemaking was "arbitrary and capricious," while stopping short of forcing new regulations.

What Happened: In a Monday opinion, the U.S. Court of Appeals for the Third Circuit criticized the SEC's handling of Coinbase's 2022 petition requesting clear rules for digital assets.

The three-judge panel ordered the agency to better explain its rejection of the petition but declined to mandate immediate rulemaking proceedings.

Judge Thomas Ambro wrote that the SEC's original denial lacked sufficient reasoning. In a separate concurrence, Judge Stephanos Bibas warned that "sporadically enforcing ill-fitting rules against crypto companies that are trying to follow the law" could effectively ban an entire industry.

The ruling comes amid broader tensions between the crypto industry and the SEC. The agency filed a separate enforcement action against Coinbase in June 2023, alleging it operated as an unregistered securities exchange. That case is currently under appeal in the Second Circuit.

Why It Matters: The court noted it would only mandate agency rulemaking in cases of "extreme delay that endangers human lives," not primarily economic concerns. The decision requires the SEC to provide a more detailed explanation for its rejection of Coinbase's petition.

The ruling adds pressure on the SEC, which is currently pursuing several high-profile enforcement cases against crypto firms including Ripple Labs and Binance, while facing industry criticism over its regulatory approach to digital assets.

Price Action: Coinbase Global stock closed at $251.20 on Monday, down 2.93% for the day. After hours, the stock rose by 1.67%. Over the past year, Coinbase's stock has surged by 87.63%, according to data from Benzinga Pro.