Cryptocurrency exchange Coinbase has scored a small victory in its legal battle with the SEC, winning permission to appeal.
Date: 2025-01-08 Author: Gabriel Deangelo Categories: BUSINESS
She also ordered a stay of all litigation pending a ruling by the Second Circuit Court of Appeals.
The SEC’s key position in the case against Coinbase was that certain cryptocurrency transactions qualified as investment contracts subject to SEC regulation, meaning they were securities. Judge Faila acknowledged the likelihood that her interpretation of “investment contracts” would be reconsidered under the Howey test, which is the basis for allowing Coinbase’s appeal.
The court noted that the judges in the cases against Terraform Labs and Ripple Labs had reached different conclusions regarding the definition of securities. For example, in the Ripple case, the judge ruled that the XRP token was not a security when programmatically sold on crypto exchanges.
“While the Court neither welcomes nor supports Coinbase’s efforts to question the SEC’s approach to crypto assets, the existence of conflicting rulings on such an important legal issue requires guidance from the Second Circuit Court of Appeals,” Judge Faila said.
The SEC filed a lawsuit against Coinbase in June 2023, alleging that the company had been operating as an unregistered exchange, broker, and clearinghouse since 2019. This prompted a wave of criticism from the crypto community, which accused the SEC and its chairman Gary Gensler of overstepping their authority.
Coinbase’s chief legal officer, Paul Grewal, said in a January 7 post on the X platform that the company is grateful for the court’s “careful review.” Additionally, Coinbase has been a vocal supporter of efforts to uncover documents that prove the alleged campaign to “disconnect” crypto companies from the banking system.
Coinbase’s Impact on the US Elections
Coinbase has also been one of the largest funders of crypto-industry efforts to influence the 2024 election. Together with Ripple, the exchange donated more than $90 million to support the Fairshake political action committee, which ran ads supporting “pro-crypto” candidates in the congressional races.
Following Republican Donald Trump’s victory in the presidential election, Grewal has renewed calls for the SEC to change its approach to regulating digital assets. Gensler announced his intention to resign on January 20, and Commissioner Jaime Lizarraga will also step down before Trump’s inauguration, potentially weakening the SEC’s position in 2025.
