Coinbase filed a motion to appeal the judge’s decision last month, allowing the lawsuit involving the Securities and Exchange Commission (SEC) and the exchange to proceed without being dismissed.
Coinbase is asserting substantive grounds for the disagreement by filing an interlocutory appeal, one of the sources said.
Coinbase’s lawyers said in their 27-page appeal that SEC commissioners, lawmakers and the courts themselves are divided on how the Howey test applies to trading. Howey test It is based on a 1946 U.S. Supreme Court case that the SEC frequently cites to determine whether assets qualify as investment contracts, or securities.
“Applying Howey to digital asset trading raises difficult questions,” Coinbase’s lawyers said. “The division of responses among lawmakers, senators and regulators speaks to the difficulty of the subject matter, and the differing judicial outcomes illustrate the point.”
It is highly unlikely that an interlocutory appeal filed before the end of the litigation process will be granted. The SEC attempted to file an interim appeal against Ripple last year, but ultimately failed. rejected.
The SEC did not immediately respond to a request for comment.
The judge decided not to dismiss
last month decision, Judge Katherine Polk Failla of New York disagreed with Coinbase’s argument that investment agreements require a formal contract. When customers purchase tokens from Coinbase, they are not simply purchasing a token, but a “digital ecosystem of tokens,” she said, Failla.
“The exchange is specifically appealing whether the SEC has authority over the trading of digital assets as investment contracts, even if there is no contract between the issuer and the investor,” said a person familiar with the matter.
Coinbase is asking Judge Failla for permission to appeal. If the appeal continues, the remainder of the case will be held in the trial court. The exchange will then wait for a resolution from the Second Circuit “to resolve this conundrum,” the same source said.
Only if the Second Circuit rules on the case will the case be returned to the trial court according to the Second Circuit’s guidelines on this particular issue. At that point, the court will proceed with any remaining cases.
“This case presents just the right vehicle for the Second Circuit to provide urgently needed guidance on the fundamental legal issues presented,” Coinbase’s lawyers said in their appeal.
The next step is discovery, summary judgment, and the case may proceed to trial and be presented to a jury. But this process is unlikely to begin until 2025. The SEC and Coinbase must also file a proposed case management plan before April. 19.
Coinbase was sued by the SEC last year for operating as an unregistered exchange, broker, and clearing agent. Regulators have also raised issues with Coinbase’s staking and wallet services.
Last month, Judge Failla sided with Coinbase on the wallet section and rejected the SEC’s claims.
Updated April 13 at 00:35 AM UTC time to include additional details about the appeal.
Updated April 13 at 00:51 AM UTC time to include clarification on the next legal steps in the process.
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