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Leading cryptocurrency exchange Coinbase has taken a significant stride forward in its journey following a recent setback in its legal battle with the U.S. Securities and Exchange Commission (SEC). Last month, a U.S. judge refused Coinbase's plea to dismiss the SEC's complaint against the company.
Coinbase's Chief Legal Officer Paul Grewal disclosed on X that the company has filed a brief requesting permission from the Court to seek an interlocutory appeal in the SEC case on the controlling question of whether an "investment contract" requires something contractual.
Judge Failla denied Coinbase's motion to dismiss the SEC's lawsuit against it, citing Judge Rakoff's opinion from the Terra case that some digital assets may be considered investment contracts under the Howey test if they exist as part of a "broader ecosystem."
The recent motion seeks Judge Failla’s permission to request an interlocutory appeal on her recent order touching investment contracts. Coinbase believes the question of how the Howey test is applied to digital assets is a controlling question of law, which is a necessary condition for granting an interlocutory appeal.
Grewal adds that Coinbase is filing the appeal sooner than usual since it is crucial to the cryptocurrency sector.
According to Grewal, Coinbase is not alone in believing that the question of whether a cryptocurrency transaction is an "investment contract" warrants an interlocutory appeal, given that the SEC has made identical arguments.
He cited that in the Ripple case, the SEC clearly stated that there is a "controlling question of law to which there are substantial grounds for difference of opinion" and noted the question's "industry-wide significance."
Coinbase's recent move might have implications for the SEC case going forward: If the case is granted an appeal, the initial trial proceedings will be suspended until the Second Circuit Court rules.
Alex Dovbnya
Gamza Khanzadaev
