Coinbase Launches Interlocutory Appeal in SEC Case – Details
Coinbase is seeking an interlocutory appeal in its ongoing court case before the US Securities and Exchange Commission (SEC). This petition marks the latest development in a highly monitored lawsuit dating back to June 2023.
In a motion filed on April 12, the US exchange seeks constitutional clarification of a specific “controlling question of law” as it fights the Commission’s accusations of operating as an “unregistered stock exchange, broker and clearing agency.”
Overall, Coinbase appears to be implementing another strategy to undermine the SEC’s petition after the court denied the exchange’s motion to dismiss the charges in question.
Coinbase, which ranks as the largest crypto exchange in the United States with 73 million users, has expressed its opinion on the need for a clear crypto regulatory framework while harshly criticizing the SEC’s continued crackdown on the digital asset industry.
Coinbase Presents Arguments for Interlocutory Appeal
Typically, judicial appeals are heard after a trial or a final decision by a lower court, but in the case of interlocutory appeals, certain issues or rulings are appealed before the conclusion of the entire case. In SEC v. Coinbase, the defendants seek a review of the meaning of an investment contract in terms of crypto transactions.
Coinbase has stated that this petition verifies all legal requirements for an interlocutory appeal. First, the exchange claims that there is a “overriding question of law,” which establishes whether an investment contract can be formed on the basis of transactions without post-sale obligations.
Additionally, Coinbase highlights aspects of “substantial grounds for differences of opinion” regarding this issue, especially regarding the application of the Howey test to cryptocurrency transactions.
Finally, the American stock exchange claims that the review of this issue could potentially neutralize the main accusations of the SEC in the judicial process between both parties, hence the need for this appeal.
Thereafter, the court will review this interlocutory appeal petition and, once certified, present the control right issue to an appellate court for appropriate resolution or guidance.
Vital Appeal for US Crypto Industry – Coinbase CLO
Commenting on Coinbase’s latest petition, the exchange’s chief legal officer, Paul Grewal, stated that the interlocutory appeal motion is important for the crypto industry, especially amid the SEC’s “unfair” enforcement actions due to the lack of a legal regulatory framework. Grewal said the following:
“We request to address this appeal earlier than normal because it is critical to our industry. The SEC’s action against us and other digital asset companies goes far beyond the legal authority given by Congress and unfairly shadows innovation in US digital assets.”
Grewal explained in an April 12 post on X that the “controversial question” revolves around whether an investment contract requires “something contractual.”
“Whether an ‘investment contract’ can exist without any post-sale obligations is a pure and contentious question of law,” the exchange states in the court document.
Grewal highlighted the early filing of Coinbase’s appeal request, filed just 17 days after the dismissal request was denied. However, he justified the action due to its importance to the broader cryptocurrency industry, with the goal of resolving the dispute over cryptocurrency transactions as soon as possible.
The crypto lawyer also expressed his confidence in the sustainability and growth of digital assets while reiterating Coinbase’s commitment to clear operational rules and regulations for the US crypto industry.
By Audy Castaneda