Coinbase is challenging the SEC in court, claiming that the regulatory body is attempting to avoid key legal questions related to digital asset transactions. The cryptocurrency exchange filed a motion for an interlocutory appeal with the US District Court for the Southern District of New York on May 24.
At the heart of the issue is whether digital asset transactions that do not involve post-sale obligations can be classified as “investment contracts” under the Howey test, which is used to define securities. Coinbase argues that this important legal question has not been conclusively addressed by any appellate court.
The SEC has opposed Coinbase’s motion, stating that the court’s decision does not present a significant legal question. However, Coinbase asserts that the decision contradicts established legal precedents, including the SEC v. Ripple Labs, Inc. case.
A successful appeal could potentially lead to the dismissal of a large portion of the SEC’s case against Coinbase, particularly concerning the company’s platform and Prime services. This could streamline the litigation process and reduce resource expenditure for both parties.
The outcome of this case could have far-reaching implications for the crypto industry, as it may define the extent of the SEC’s authority over digital asset transactions. Coinbase is seeking expedited appellate review to provide clarity and guidance for the industry.
