Coinbase Seeks Interlocutory Appeal Amid Legal Battle with SEC


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On April 12, the Coinbase legal team took a strategic step in its ongoing legal battle with the United States Securities and Exchange Commission (SEC) by filing a brief requesting permission to pursue an interlocutory appeal.

The crux of the issue revolves around a “controlling question” regarding whether an “investment contract” necessitates something contractual. While Coinbase argues in the affirmative, asserting that an investment contract requires post-sale obligations, the SEC holds a differing opinion.

As reported earlier by TheCoinRise, Coinbase took a significant step in its legal battle with the SEC, asking the court to review the agency’s question whether an investment contract necessitates “something contractual.”

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Coinbase Files Interlocutory Appeal

An interlocutory appeal allows a party to challenge a trial court’s ruling while other aspects of the case are still in progress, providing an opportunity for expedited resolution.

Coinbase’s Chief Legal Officer, Paul Grewal, emphasized that the SEC’s actions against Coinbase and other crypto firms exceed the legal authority granted by Congress, casting an unwarranted shadow over digital asset innovation in the United States.

SEC vs. Coinbase

The SEC initiated legal action against Coinbase in June 2023, alleging that the exchange’s provision of crypto asset trading constituted operating as an unregistered securities exchange and broker-dealer. 

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Coinbase moved to dismiss these allegations, contending that the digital asset transactions in question did not meet the criteria of “investment contracts” under the Howey test due to the absence of post-sale obligations or contractual undertakings by the issuers.

Now, Coinbase is pushing back, questioning whether digital asset transactions lacking post-sale obligations can indeed be classified as “investment contracts” and thus subject to SEC regulation.

SEC’s Stance in the Ripple Case

Grewal pointed out that Coinbase’s stance aligns with arguments previously made by the SEC itself, citing the SEC’s stance in the Ripple case and highlighting the industry-wide significance of the issue at hand.

Amidst this legal tussle, the SEC continues its regulatory crackdown on the cryptocurrency industry, with recent legal action taken against the decentralized exchange Uniswap. This aggressive stance by the SEC has drawn criticism from industry observers like Ryan Sean Adams, who view it as a broader assault on crypto innovation tantamount to a “war on the internet.”

Furthermore, the SEC’s scrutiny extends to major projects like Ethereum, with the Ethereum Foundation facing a subpoena in March to determine whether ETH constitutes a security. SEC Chair Gary Gensler’s remarks suggest that Ethereum’s transition to proof-of-stake consensus could potentially bring it within the ambit of investment contracts, although a definitive conclusion remains pending.

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