Thomas Daniels
Coinbase is intensifying its legal defense in its battle against the U.S. Securities and Exchange Commission (SEC), calling for a reconsideration of its April 2024 interlocutory appeal. The exchange’s legal team is urging Southern District of New York Judge Katherine Failla to review the appeal in light of the SEC’s recent decision to challenge the outcome in the Ripple lawsuit.
The SEC initially sued Coinbase in June 2023, accusing the company of selling unregistered securities. In a letter dated October 5, Coinbase’s attorneys argued that the regulator’s notice of appeal in the Ripple case acknowledges the ambiguity surrounding the application of the Howey Test—a set of criteria used to determine if a financial instrument qualifies as a security. They emphasized the need for a deeper examination of how the Howey Test applies to secondary-market transactions involving digital assets.
The letter highlights the “industry-wide significance” of this issue, urging the court to grant prompt and thorough appellate review. “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 counsel stated, pressing the urgency of the appeal.
Noted financial services lawyer James Murphy pointed out that it is unusual for the court not to have ruled on Coinbase’s original motion for an interlocutory appeal filed in April, suggesting that such motions are typically handled more swiftly. Murphy praised the legal team’s strategic use of the SEC’s Ripple appeal to strengthen its case for a reconsideration.
Recent Developments in SEC vs. Coinbase
The SEC recently petitioned the court for a February 2025 extension to produce discovery documents that were originally due by October 18, 2024. This extension further delays proceedings, with the discovery documents critical to the ongoing legal battle.
Moreover, on September 24, a panel of judges criticized the SEC’s failure to provide clear rules on digital assets, following Coinbase’s 2022 request for regulatory clarity. In addition, Coinbase has petitioned the court to compel the Commodities Futures Trading Commission (CFTC) to release its communications with token issuers, believing these documents could shed light on which digital assets fall under securities regulation.
