YEREVAN (CoinChapter.com) — On Jan. 7, Judge Katherine Failla from the U.S. District Court for the Southern District of New York approved Coinbase’s request for an interlocutory appeal. The judge ordered a stay on all case proceedings until the Second Circuit Court reviews the appeal. This legal decision pauses the ongoing dispute between Coinbase and the U.S. Securities and Exchange Commission (SEC).
SEC v. Coinbase Case Document. Source: CourtlistenerThe lawsuit revolves around whether specific cryptocurrency transactions facilitated by Coinbase qualify as securities under U.S. law. Judge Failla recognized that interpretations of securities regulation vary across courts, which could lead to a reversal of her earlier ruling. The appeal stems from her March 2024 decision denying Coinbase’s motion for judgment.
SEC Allegations Against Coinbase Remain Under Review
In June 2023, the SEC filed an enforcement action against Coinbase, alleging that the platform operated as an unregistered securities exchange, broker, and clearing agency. The regulator claimed Coinbase allowed transactions involving securities without the required registration since at least 2019.
Coinbase has rejected these allegations, arguing that the assets in question do not meet the legal definition of securities. The company’s legal team has pointed to conflicting rulings in other cases, such as those involving Ripple and Terraform Labs, to support its stance.
Judge Failla acknowledged these inconsistencies, stating that
“conflicting decisions on an important legal issue necessitate the Second Circuit’s guidance.”
However, she criticized Coinbase’s portrayal of the SEC’s approach as overly aggressive, focusing instead on the broader need for clarity in cryptocurrency regulation.
Ripple Case Highlights Legal Uncertainty for Cryptocurrency
The Ripple case has played a significant role in shaping the legal debate. In July 2023, a judge ruled that XRP tokens were not securities in programmatic sales, which are transactions conducted through cryptocurrency exchanges. This decision contradicted stricter interpretations in other cases, such as Terraform Labs, leading to further legal ambiguity.
Coinbase has cited these legal discrepancies to bolster its argument for a comprehensive judicial review. The SEC, meanwhile, has continued to assert that digital assets like XRP and others fall under its regulatory framework when meeting the criteria of investment contracts.
SEC Leadership Changes Could Shift Regulatory Focus
With SEC Chair Gary Gensler set to step down on Jan. 20, 2025, and Commissioner Jaime Lizárraga also departing, the agency’s leadership will undergo changes. These shifts could influence the SEC’s future approach to cryptocurrency regulation.
Coinbase has called for regulatory reforms, emphasizing the importance of clarity in digital asset classifications. Chief legal officer Paul Grewal stated on Jan. 7 that the company appreciated the court’s careful decision to grant the appeal.
Paul Grewal on SEC v. Coinbase Appeal. Source: X
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