Coinbase Files Interlocutory Appeal in SEC Case

Coinbase has filed an interlocutory appeal in its ongoing legal battle with the Securities and Exchange Commission (SEC). The appeal, filed on Friday, aims to address a narrow point of legal disagreement and seeks to have it considered independently by the U.S. Court of Appeals for the Second Circuit.

Key points:

• Coinbase’s interlocutory appeal challenges the SEC’s authority to treat digital asset transactions as investment contracts.
• The exchange argues that the application of the Howey Test to cryptocurrency transactions has led to a lack of clarity.
• The appeal follows a federal judge’s denial of Coinbase’s motion to dismiss the SEC’s case against the company.
• If the appeal is granted, the specific question would be addressed by the Second Circuit.

The appeal comes after Judge Katherine Polk Failla of the U.S. District Court for the Southern District of New York ruled last month that the SEC had presented sufficient legal grounds for its accusations against Coinbase, allowing the case to move forward.

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In her decision, Judge Failla disagreed with Coinbase’s argument that investment contracts require a formal contract. Also, the judge stated that when a customer purchases a token on Coinbase, they are not only buying the token but also investing in the token’s digital ecosystem.

Coinbase argues that Howey test is creating uncertainty

Coinbase’s lawyers contend that the SEC’s application of the Howey Test, derived from a 1946 U.S. Supreme Court case, to cryptocurrency transactions has created uncertainty and division among lawmakers, regulators, and courts.

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They argue that the case presents an ideal opportunity for the Second Circuit to provide much-needed guidance on this fundamental question of law.

The Second Circuit would address the specific question of whether the SEC has the authority to regulate digital asset transactions as investment contracts, even in the absence of a formal contract between the issuer and investor, if the court grants the interlocutory appeal.