In a major development, lawyers for Coinbase filed a letter urging Judge Katherine Failla of the Southern District of New York to reconsider an appeal filed earlier this year. The exchange’s legal team pointed to the U.S. Securities and Exchange Commission’s (SEC) recent appeal in the Ripple case, arguing that it shows ambiguity in how the SEC defines a security.
Coinbase has been seeking permission to appeal a decision in its ongoing legal battle with the SEC. The exchange first filed this request in April 2024. It asked the court to review a key question: how the digital assets fit into the SEC’s “Howey Test.” The Howey Test was developed by the Supreme Court in 1946 as the guidelines to determine what can be considered a security.
Coinbase Seeks Clarity on Crypto Regulation with New CFTC Motion
In a letter to Judge Failla, Coinbase’s attorneys wrote that the SEC’s appeal in the Ripple case means that the criteria set by the Howey Test are still vague. They claim that the current uncertainty that surrounds these rules in the SEC indicates that more attention needs to be paid to how they apply to cryptocurrencies. In its legal department, Coinbase has some opinions that addressing this problem is important not only for it but also for the whole crypto sphere.
However, the SEC has been against Coinbase’s motion and, in April, filed its motion to stay the appeal. The agency further reasons that there is no constitutional issue of major controversy that would warrant such an appeal. However, Judge Failla has not made any decision regarding either of the requests, and the situation remains undecided.
Legal experts have described the court’s failure to rule on Coinbase’s motion as shocking because motions for interlocutory appeals do not usually take long to be determined. James Murphy, a financial services lawyer, said that the decision of the legal team to rely on the appeal of the SEC was wise.
Besides appealing the decision, in October 2024, the company filed a motion in the court to compel the Commodities Futures Trading Commission (CFTC) to produce communications with token issuers. Coinbase suggested that these documents may help to shed light on which cryptocurrencies are classified as securities.
It remains to be seen how the court will decide, but the Coinbase vs. SEC legal case goes on. Moreover, this case continues to provoke a number of questions regarding the regulation of digital assets in the United States.
