The long-drawn legal battle between Coinbase and the US Securities and Exchange Commission (SEC) continues to provide more twists and turns in what may be a pivotal case in crypto regulatory history. In a recent development, the American crypto exchange has now filed a response to the commission’s petition against an initial motion for an interlocutory appeal in this contentious legal case.
Coinbase Sends Fiery Response To SEC As Appeal Saga Thickens
On April 12, Coinbase approached the US court seeking clarification on whether an investment contract can be formed with no post-sale obligations. The crypto exchanges consider this issue as a “controlling question of law” critical to its ongoing case with the SEC.
In response, the SEC argued that there was no need for the court to certify such an interlocutory appeal as the existing securities regulations, especially the Howey Test, have proven sufficient for decades. In particular, the Commission stated that no court had ever requested a post-sale contract following the use of the test in the past.
However, in a fresh Memorandum of Law submitted on Friday, May 24, Coinbase addresses this statement saying that the interlocutory appeal revolves around a novel issue in that “no appellate court has addressed whether a digital asset transaction carrying no post-sale obligations can be an ‘investment contract’ under Howey”.
In addition, the exchange accuses the SEC of avoiding the “controlling question of law” in its counter-motion by diverting attention to the controversy with the application of the Howey Test to cryptocurrency transactions rather than Coinbase’s petition which seeks guidance on Howey’s application to digital assets.
Coinbase Seeking For ‘Stylish’ Court Victory
Finally, in Coinbase’s latest petition, the exchange reiterated the potential importance of this interlocutory appeal on the outcome of its legal case with the SEC. The defendant’s lawyers stressed that with a favorable outcome, over 70% of the SEC complaints could be rendered invalid.
A statement from the petition read:
Most of the SEC’s 116 recently-served document requests and all of its 32 requests for admission, 10 third-party subpoenas, and 9 requests for inspection are about Coinbase’s platform and Prime services rather than the unrelated staking program. This portends a discovery process, motion practice, and a trial skewed heavily toward claims centering on the “ecosystems” of 12 distinct tokens—claims that are destined to consume substantial judicial and party resources but that, with interlocutory review, could be out of the case.
On June 6, 2023, the SEC charged Coinbase with accusations of operating as an unlicensed securities exchange, broker, and clearing agency. Considering Coinbase’s status as the largest US exchange, the result of this is tipped by many to have massive effects on regulations in the country’s burgeoning crypto industry.
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