In simpler terms, the court decision allows Coinbase to appeal an intermediate ruling made by the U.S. Securities and Exchange Commission (SEC) in their ongoing dispute, marking a minor success for Coinbase in this legal case.
In a filing made on January 7th in the US District Court for the Southern District of New York, Judge Katherine Failla decided to hear Coinbase’s appeal regarding her previous order denying their motion for judgment (which she issued in March 2024). Judge Failla then paused all further proceedings in the case until the Second Circuit Court of Appeals rules on an interlocutory appeal concerning that same order.
One key point in the Securities and Exchange Commission’s case against Coinbase was their claim that certain cryptocurrency transactions fell under the category of “investment contracts” that the SEC could regulate, which is equivalent to securities. Judge Failla suggested there might be a change in interpretation regarding investment contracts, based on the Howey test, and granted Coinbase’s appeal, allowing for potential reversal of her previous decision.
The filing revealed that judges presiding over SEC’s civil suits against Terraform Labs and Ripple Labs reached differing verdicts, with contrasting opinions on whether the digital assets were considered securities. In the Ripple case specifically, a judge decided that the XRP token was not classified as a security when it comes to automated sales on cryptocurrency platforms.
As an analyst, I’d rephrase Judge Failla’s statement like this: “Though the Court doesn’t endorse or validate Coinbase’s attempts to criticize the SEC’s handling of crypto-assets, it’s crucial to acknowledge that the varying rulings on this significant legal matter require the Second Circuit’s input in order to bring clarity.
In June 2023, the Securities and Exchange Commission (SEC) brought an enforcement action against Coinbase, claiming that the exchange had been functioning as an unregistered securities trading platform, brokerage firm, and clearing house since at least 2019. Critics within the cryptocurrency sector have accused the SEC and its Chair, Gary Gensler, of exceeding its jurisdiction with civil lawsuits.
1. In a post on January 7, Coinbase’s Chief Legal Officer Paul Grewal expressed gratitude for the court’s thoughtful review in granting their appeal. Furthermore, the exchange has been supporting initiatives aimed at compelling government agencies to disclose documents that may indicate a coordinated effort among officials to freeze crypto companies’ accounts – often referred to as Operation Chokepoint 2.0.
Coinbase got involved in US elections
In the U.S., Coinbase was a significant supporter of initiatives within the cryptocurrency sector aiming to impact the 2024 elections’ results. Together with Ripple, they donated over $90 million to the political action committee Fairshake. This committee invested in media campaigns to boost candidates perceived as “pro-crypto” during congressional elections.
As a crypto investor, I’ve been closely following the political landscape, and with the presidential election won by Donald Trump, Grewal has once again urged the SEC to reconsider its stance on digital assets. Interestingly, Gensler announced his intention to step down as chair on January 20th, and commissioner Jaime Lizárraga also plans to depart before Trump’s inauguration. This could leave the SEC short-staffed as we approach 2025.
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2025-01-08 01:11