Crypto exchange Coinbase has renewed its efforts to appeal a judge’s ruling in its case against the U.S. Securities and Exchange Commission (SEC), pointing to recent congressional developments. In a closing brief filed on Friday, Coinbase highlighted a growing divide between lawmakers and the SEC regarding its jurisdiction over cryptocurrency.
Coinbase’s statement referenced the recent bipartisan approval of the FIT21 – Financial Innovation and Technology for the 21st Century Act by the U.S. House of Representatives. The argument presented was that this legislative action conflicts with the SEC’s expansive claims of jurisdiction over cryptocurrencies. In Coinbase’s words, “Legislators’ disagreement with the SEC’s position has deepened: just this week, the U.S. House of Representatives approved comprehensive digital asset legislation on a bipartisan basis that would deny the SEC the expansive jurisdiction it claims.”
The FIT21 Act, passed by the House with a 279 to 136 vote, aims to empower the CFTC – Commodity Futures Trading Commission to oversee crypto spot markets and “digital commodities,” particularly bitcoin. The bill saw support from 71 Democrats, including Nancy Pelosi, signaling a potential shift in political attitudes towards cryptocurrency regulation. Although the bill is unlikely to become law this year, it reflects a notable change in the legislative approach to crypto regulation.
Coinbase initially sought to appeal after Judge Katherine Polk Failla of New York dismissed its argument that investment contracts require a formal contract. Judge Failla ruled that when customers purchase tokens on Coinbase, they are not merely buying tokens but are participating in the “token’s digital ecosystem.”
Coinbase’s Chief Legal Officer, Paul Grewal, stated on X that the primary question for the appeal is “whether the SEC may regulate as ‘investment contracts’ digital asset transactions that don’t involve anything contractual.” The SEC has opposed Coinbase’s move to appeal.
Judge Failla will determine whether the appeal request can proceed to the U.S. Court of Appeals for the Second Circuit. The appellate court must also agree to hear the case for the appeal to move forward.