- Judge Katherine Polk Failla grants Coinbase an interlocutory appeal in its ongoing lawsuit against the SEC
- Appeal to the Second Circuit Court of Appeals could clarify if Coinbase’s crypto offerings are investment contracts
- SEC claims Coinbase sold unregistered securities; Coinbase argues they are not investment contracts without formal agreements
New York District Court Judge Katherine Polk Failla has recently granted a motion for Coinbase to appeal its lawsuit against the SEC. The ruling, released on January 7th, allows Coinbase to appeal to the Second Circuit of the US Court of Appeals while the case is still on the move.
The filing relates to the June 6, 2023 lawsuit filed by the Securities and Exchange Commission against Coinbase, accusing the cryptocurrency exchange of illegally offering unregistered securities through the company’s crypto brokerage and staking programs.
This most recent appeal is of the most significance as it requests higher courts to provide more clarity on the accusation, particularly regarding whether Coinbase’s practices should fall under “investment contract” rules.
The SEC claims that Coinbase’s crypto offerings are in truth investments, similar to stock or bond contracts. By that logic, investment contracts should follow securities laws. Meanwhile, Coinbase argues that without written contracts regarding the offer of digital assets as investments, the company’s practices shouldn’t be categorized as investment offerings.
Furthermore, the argument in favor of Coinbase and the overall crypto market generally compares cryptocurrency offerings as commodities, such as gold or oil, rather than securities like stocks and bonds. So far there is no such contract clarifying whether this type of offering should be regarded as investments—with Coinbase and other crypto firms like Ripple arguing that it should not be classified under security laws.
This most recent development on the ongoing Coinbase vs SEC lawsuit holds the utmost significance, as a decision from higher courts that investment contracts require a specific and formally written contract, this ruling would favor most if not all cryptocurrencies as it would put a lot more weight on the “crypto-not-a-security” argument.
It also grants the cryptocurrency exchange more time before the high court decides on the future of the market. The interlocutory appeal pauses the current district court affairs until the Second Circuit Court of Appeals reaches a decision. While no specific deadline was set, this proceeding can take several months or up to a year before concluding.
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