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Coinbase is stepping up its legal battle with the US SEC by requesting an interlocutory appeal on investment contracts.
The ongoing battle between Coinbase and the SEC took a new turn as the exchange appeals court ruled to clarify the application of the Honey test to crypto. The appeal emphasizes whether digital assets become unregulated after the initial sale as well as major challenges in cryptocurrency regulations.
All About Coinbase’s Appeal
Paul Grewal, the Chief Legal Officer of Coinbase, has taken a significant step in its legal battle with the U.S. Securities and Exchange Commission (SEC). Grewal filed a request to pursue an interlocutory appeal, emphasizing the critical questions regarding the ‘investment contract.’
Grewal points out that the SEC’s measures are surpassing, potentially suppressing innovation in the digital asset space. That comes at a time when the Howey test on digital assets becomes a divisive matter.
The appeal simply argues that the test showcases some major challenges and is evidenced by different judicial, regulatory, and legislative bodies. The appeal also talks about whether the crypto tokens involved in the transactions should be categorized as an investment contract or not.
Such classification is significant as it uncovers whether the transactions need registration under securities law or not. The core of the debate centers on the necessity of a formal contract for an “investment contract.”
According to Coinbase, such a contract is essential, which differs from the SEC’s position. The judgment of this legal challenge is poised to significantly affect the future of the cryptocurrency industry and define the regulatory framework for digital asset commodities throughout the U.S.
The cryptocurrency exchange is pressing for a speedy resolution through the appeal process, highlighting the crucial need for standard guidelines in the industry characterized by swift technological advancements.
The ongoing battle now revolves around Judge Katherine Polk Failla’s recent ruling, which allowed the commission to proceed on most counts and the SEC’s standing.
The exchange argues that once the tokens are transacted to the secondary market and detached from their source business context, they should no longer be subject to the commission’s legislative grasp. Also, the exchange is challenging the application of this test to digital assets to establish a more defined regulatory framework for the whole crypto space.
The Need For Regulatory Clarity
Coinbase’s perspective is part of a broader trend, showcasing a perspective shared by the SEC in the Ripple litigation. The commission has identified a key legal question and its relevance across the sector.
Amidst the ongoing legal battle, Coinbase stands firm in its dedication to the domain of digital currencies, maintaining that they are a permanent fixture. The platform commits to seeking clear regulations that benefit the Coinbase ecosystem and the vast number of American cryptocurrency investors.
Furthermore, Coinbase also ensured its users that the services would proceed as usual.
In a recent development, the exchange achieved a small win over the SEC when a court decided that the resale of cryptocurrencies does not include the sale of securities.
Anurag is working as a fundamental writer for The Coin Republic since 2021. He likes to exercise his curious muscles and research deep into a topic. Though he covers various aspects of the crypto industry, he is quite passionate about the Web3, NFTs, Gaming, and Metaverse, and envisions them as the future of the (digital) economy. A reader & writer at heart, he calls himself an “average guitar player” and a fun footballer.
