Coinbase is urging the court to revisit an appeal, citing parallels between its ongoing legal battle with the SEC and the recent appeal filed by the SEC in the Ripple case. The exchange hopes to secure a more comprehensive review of the SEC’s stance on digital assets.
Coinbase Seeks Clarity on SEC’s Application of the Howey Test
On October 5, 2024, Coinbase’s legal team filed a letter to Judge Katherine Failla of the Southern District of New York, urging reconsideration of its interlocutory appeal, which was initially filed in April 2024. Coinbase attorneys argued that the Securities and Exchange Commission (SEC) implicitly admitted to the ambiguity of its application of the Howey Test by filing an appeal in the Ripple case. The Howey Test, used to determine whether an asset is classified as a security, is central to the ongoing dispute between the SEC and Coinbase.
The attorneys pointed out that the SEC’s decision to appeal the Ripple ruling indicates that there is “industry-wide significance” in how the Howey Test is applied to digital asset transactions in secondary markets. Coinbase’s legal team stressed the need for immediate appellate review, given the broader implications of the case for the cryptocurrency industry.
Delays and Industry Implications
Coinbase was initially sued by the SEC in June 2023, accused of selling unregistered securities. Despite the lawsuit’s significance, the court has not yet ruled on the exchange’s motion for an interlocutory appeal, which was submitted over six months ago. Legal experts, including financial services lawyer James Murphy, noted that it’s unusual for such motions to be delayed for this long, praising the strategy to leverage the SEC vs. Ripple case to push for quicker action.
The recent developments further highlight the ongoing regulatory uncertainty facing cryptocurrency exchanges. On September 24, a panel of judges criticized the SEC’s refusal to provide clear guidelines on digital assets. Coinbase had previously requested these guidelines in 2022, seeking clarity on which tokens should be classified as securities.
Coinbase’s Push for CFTC Communications
In a related development, Coinbase petitioned the court to compel the Commodities Futures Trading Commission (CFTC) to release communications with token issuers. Coinbase’s legal team believes this information could help determine which digital assets fall under securities regulations, providing crucial clarity for its ongoing case with the SEC.
Adding to the delays, the SEC requested an extension to deliver discovery documents related to Coinbase. These documents, originally due by October 18, 2024, have now been postponed until February 2025, further dragging out the legal battle.
