In the latest twist in the legal battle between Coinbase and the U.S. Securities and Exchange Commission (SEC), the cryptocurrency exchange has requested that the presiding judge approve its interlocutory appeal. This request comes in response to the SEC’s appeal in a separate case involving Ripple, another prominent firm in the digital asset industry.
Coinbase’s appeal request, originally filed in April, asks the court to allow the Second Circuit of Appeals to review a pivotal question in the case: how the Howey Test—a 1946 Supreme Court ruling that determines what constitutes a security—applies to digital assets. The Howey Test is a critical issue in both the Coinbase and Ripple cases, and Coinbase aims to ensure that the court has a “complete picture” by presenting its arguments for appeal concurrently with the SEC’s appeal in the Ripple case.
“Members of Congress, Senators, and regulatory agencies have divided in answering [the question] of how the Howey Test applies to digital assets, illustrating the complexity of the subject,” Coinbase’s legal team wrote in their appeal. This complexity, they argue, is further highlighted by divergent judicial outcomes in similar cases.
Despite the significance of the matter, the SEC initially opposed Coinbase’s appeal request, arguing in May that there was “no substantial ground for difference of opinion.” Since then, Judge Katherine Polk Failla, who is overseeing the case in New York, has yet to rule on the request. However, Coinbase is renewing its push for an interlocutory appeal following the SEC’s decision to appeal the ruling in its case against Ripple.
The crypto exchange contends that allowing both cases to be reviewed by the Second Circuit simultaneously would offer a comprehensive understanding of the legal and practical implications of the SEC’s position on digital asset transactions. “The SEC has conceded, and now reconfirms by its appeal in Ripple, that the issues presented by Howey’s application to secondary-market digital asset transactions are of ‘industry-wide significance,’” Coinbase’s legal team stated in their letter. “Prompt and complete appellate review is urgently needed.”
Interlocutory appeals, which are granted before a case is fully decided, are relatively rare. However, legal experts believe Coinbase’s argument is strengthened by the SEC’s recent actions in the Ripple case. James Murphy, a cryptocurrency-focused attorney, described Coinbase’s filing as a “smart move,” noting the unusual delay in Judge Failla’s ruling on the original appeal motion. “It is astounding that Judge Failla never ruled on Coinbase’s original motion for interlocutory appeal filed back in April,” Murphy remarked.
Both Coinbase and the SEC have declined to comment on the ongoing legal developments.
