Coinbase requests interlocutory appeal over SEC's 'controlling question'

Coinbase, a well-known cryptocurrency exchange, is asking the US District Court to examine closely a key issue that the SEC has raised in their ongoing legal dispute.

“The issue at hand in this case is clear-cut and free from factual disagreements, making it ready for prompt consideration by the court,” Coinbase stated in their filing to the US District Court for the Southern District of New York on April 12.

Paul Grewal, Coinbase’s legal chief, clarified in a blog post dated April 12 that the crucial aspect is whether an investment contract involves some form of binding agreement.

In the court document, it is argued that whether an “investment contract” can exist without any post-sale obligations is a purely legal issue to be determined by the court.

Grewal explained that Coinbase believes an investment contract is based on contractual commitments, but the SEC takes a different stance, asserting that it isn’t necessary.

After US District Judge Katherine Failla refused to throw out the Securities and Exchange Commission’s (SEC) lawsuit against Coinbase, the exchange will have to face the charges that it functions as an unlicensed exchange, broker, and clearing agency.

If the court grants the interlocutory appeal, it may substantially impact the current case that commenced in June 2023.

Coinbase notes that the SEC considered its cryptocurrency transactions as investment contracts, even without any reported promises or agreements.

Reversal on the question presented would dispose of the SEC’s principal claims, which account for the bulk of the complaint’s factual allegations.

A question of law is considered decisive if its answer has the power to substantially influence how the case is handled.

Grewal brought up the fact that they filed their appeal request only seventeen days after their motion to dismiss was denied was mentioned prominently.

Instead, he explained that the action was necessary for the advancement of the crypto industry as a whole, with the goal of quickly settling the controversy surrounding cryptocurrency transactions.

“We’re asking to take this up on appeal earlier than normal because it’s critical to our industry. The SEC’s action against us and other digital asset companies goes way beyond the legal authority granted by Congress and puts an unjust cloud over US digital asset innovation.”

After Coinbase successfully resolved a civil lawsuit where plaintiffs accused the exchange of selling them unregistered securities without proper registration.

On April 6, according to CryptoMoon’s report, a US appeals court decided that Coinbase is allowed to facilitate the trading of cryptocurrencies as secondary sales without breaking the Securities Exchange Act.

2024-04-13 08:43

Coinbase requests interlocutory appeal over SEC’s ‘controlling question’

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