Coinbase, a prominent cryptocurrency exchange, has advanced its legal confrontation with the U.S. Securities and Exchange Commission (SEC) by initiating a motion for interlocutory appeal. This action comes after a judge’s ruling last month, which permitted a lawsuit involving Coinbase and the SEC to advance without dismissal.
Coinbase’s decision to file for an interlocutory appeal highlights the notable discrepancies in how the Howey Test, a key legal measure determining an asset’s status as an investment contract and potential security, is interpreted and applied.
In its 27-page appeal, Coinbase challenges the SEC’s authority over digital asset transactions as investment contracts, particularly in cases where there is no formal contract between the issuer and investor. The exchange contends that customers purchasing tokens on Coinbase are not entering into formal contracts but rather participating in the token’s digital ecosystem.
While an interlocutory appeal is typically filed before the conclusion of legal proceedings, its approval is uncertain. However, Coinbase is seeking permission from Judge Katherine Polk Failla to proceed with the appeal. If granted, the case would be temporarily put on hold in the trial court until the Second Circuit provides guidance on the specific legal question raised by Coinbase.
The legal dispute between Coinbase and the SEC stems from allegations of operating as an unregistered exchange, broker, and clearing agency. Despite ongoing legal challenges, Coinbase recently secured a victory when Judge Failla dismissed the SEC’s claim regarding Coinbase’s wallet services.