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Coinbase has submitted a request to appeal a judge’s ruling from the previous month, which allowed the SEC’s litigation against them to proceed.
Coinbase is seeking a clear ruling from a higher court to remove any uncertainty regarding the SEC’s ability to classify some digital asset transactions as investment contracts.
SEC vs Coinbase So Far
In January, Coinbase and the SEC debated whether the regulator has authority over cryptocurrency exchanges unless Congress explicitly grants it. Furthermore, a legal challenge in mid-March alleged that the regulator had not correctly regulated cryptocurrency. However, it is not directly linked to Coinbase’s ongoing legal battle with the SEC.
Coinbase was accused of unlawfully operating as an exchange, broker, and clearing agency. The court dismissed the allegation that the exchange acted as an unregistered broker via its Wallet application. As a result, the SEC only partially won the case, causing Coinbase’s stock to drop by over 3%.
Coinbase Files Appeal Against SEC
The recent appeal by Coinbase could potentially pause the ongoing trial. This will be the result as the appeal would enable the Second Circuit Court to review the matter.
The SEC has adopted a new interpretation, arguing that the mere integration of digital assets into a token’s ecosystem might be considered an investment contract.
This approach has sparked a lot of debate among lawmakers, regulators, and industry participants. Even the SEC Commissioners have acknowledged the regulatory uncertainty that is affecting the crypto sector.
Coinbase Challenges SEC’s Claims
Coinbase disputes SEC’s claims, stating that the transactions lack traditional elements of an investment contract. The company sees the Second Circuit’s appeal as an opportunity to provide guidance on this legal issue.
Coinbase’s legal team argued that applying the Howey test to digital asset transactions leads to difficult questions. Moreover, Members of Congress, Senators, and regulatory agencies have different answers to these questions, highlighting the complexity of the matter.
Additionally, the divergent judicial outcomes further emphasize this point. As a result of these differences, there is currently a “cloud of legal uncertainty” hanging over the digital asset industry. The current case is an opportunity for the Second Circuit to quickly and effectively resolve this uncertainty.
Recently, a US court refused Coinbase’s appeal in a lawsuit that the SEC filed against them last year. Judge Failla found that the SEC’s evidence was strong enough to require Coinbase’s registration as an exchange, broker, and clearing-house.
However, she did agree with Coinbase on the separate issue of their wallet product. She concluded that it was not related to the SEC’s securities charges. Following the court’s dismissal, Grewal said that Coinbase will continue to fight against the SEC in court.
Summary
Coinbase seeks a clear ruling from a higher court to remove any uncertainty regarding the SEC’s ability to classify some digital asset transactions as investment contracts. In January, Coinbase and the SEC debated whether the regulator has authority over cryptocurrency exchanges unless Congress explicitly grants it. Towards the end of March, the SEC partially won the case.
Disclaimer
The views and opinions stated by the author or any people named in this article are for informational purposes only. They do not establish financial, investment, or other advice. Investing in or trading in stocks, cryptos, or other related indexes comes with a risk of financial loss.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
