Turning point! Coinbase wins important victory in legal dispute with SEC

Source: Blockchain Knights

In a ruling on Jan. 7, District Judge Katherine Polk Failla of the U.S. District Court for the Southern District of New York granted Coinbase’s motion for an interlocutory appeal in its lawsuit against the U.S. Securities and Exchange Commission (SEC).

Judge Failla claimed that both parties were seeking to clarify an “important legal question,” although they disagreed on “which court should appropriately clarify.”

As a result, Coinbase can now appeal the SEC’s allegations to the U.S. Court of Appeals for the Second Circuit.

Court proceedings will remain suspended pending a ruling on whether an investment contract requires an actual contract.

An interlocutory appeal is a legal procedure that allows parties to appeal a trial court’s decision while a case is pending.

The SEC filed a lawsuit against Coinbase on June 6, 2023, alleging that the company offered unregistered securities through its Crypto asset offering and spot-trading program.

Coinbase Chief Legal Officer Paul Grewal cheered the victory on X, and he also explained the development in sports terms: "The referee just stopped the clock on the field and is heading to the replay room in New York..." 

VariantFund Chief Legal Officer Jake Chervinsky described the news as "very important."

Chervinsky added that the court's ruling will clarify whether digital asset transactions on the secondary market are subject to securities laws.

Jeremy Hogan, partner at the law firm Hogan & Hogan, emphasized that interlocutory appeals are rare, indicating that the trial judge believes that something should be examined. 

In addition, Hogan also said that Coinbase's appeal is the same core argument as Ripple's appeal in its legal battle with the SEC.

Kraken Chief Legal Officer Marco Santori congratulated Coinbase's legal team and called the development "a big win for the entire ecosystem."

Amanda Tuminelli, chief legal officer of the DeFi Education Fund, said the decision to stay the lawsuit while Coinbase appeals to the Second Circuit is very important.

Tuminelli also emphasized that Judge Fallia considered the Blockchain Association's "friend of the court" brief.

The brief argues that distinguishing the offering and sale of Crypto assets from the offering and sale of commodities and collectibles can expand the SEC's regulatory scope.