A federal judge has permitted Coinbase to file a limited appeal against the SEC for allegedly mishandling unregistered securities.
In its ongoing legal struggle with the US Securities and Exchange Commission (SEC), Coinbase has won a partial victory.
A federal judge has permitted Coinbase to file a limited appeal against the SEC for allegedly mishandling unregistered securities.
The US District Court granted Coinbase’s motion for Tuesday’s interlocutory appeal for the Southern District of New York Judge Katherine Polk Failla.
This procedure enables a higher court to comment on a particular legal issue before the case moves forward.
The SEC’s case against Coinbase is still pending.
The remainder of the SEC’s action against Coinbase will be put on hold while the US Court of Appeals for the Second Circuit considers this appeal.
Whether specific digital tokens exchanged on Coinbase’s platform are considered securities under US law is at the heart of the legal debate.
The SEC claims that by permitting the trade of these tokens without the required registration, Coinbase broke securities laws.
On the other side, Coinbase argues that these tokens don’t fit the definition of securities under the Howey Test, a legal threshold set by a significant Supreme Court ruling.
A key component of the Howey system is that the issuers of these tokens do not have any duties to buyers, as highlighted in Coinbase’s response.
Judge Failla noted the contradictory decisions made by other federal courts in comparable cases, acknowledging the complexity of the legal problems at hand.
According to her, settling this legal dispute is essential to moving the case forward and clarifying the cryptocurrency sector.
Coinbase’s Chief Legal Officer, Paul Grewal, appreciated the court’s ruling. “We value the court’s thoughtful review,” he posted on X (formerly Twitter). “We’re moving on to the Second Circuit.”
The SEC, which Gary Gensler, a crypto sceptic, heads, has not yet responded to the decision.
Gensler is scheduled to step aside when the next government takes office in January 2025, which might change the SEC’s position in the cryptocurrency sector.
The course of this case and others like it could change if the SEC takes a more industry-friendly stance under a Republican-led administration.
Ultimately, the Supreme Court may hear arguments over what qualifies as a cryptographic security.
Crypto Owners in the US Anticipate Less Regulation
According to reports, under the incoming government of Republican President-elect Donald Trump, cryptocurrency enforcement in the US may be loosened since regulatory objectives are anticipated to change.
Speaking at a legal conference in New York, senior government attorneys, both current and retired, said that although financial fraud cases will continue to be prosecuted, the Justice Department’s emphasis will probably shift to immigration enforcement, a significant campaign pledge made by Trump.
According to Scott Hartman, co-chief of the US Attorney’s Office in Manhattan’s securities and commodities task force, less money will be spent investigating cryptocurrency-related offences.
The SEC has recently come under increasing fire for its “regulation-by-enforcement” strategy regarding the cryptocurrency sector.
