Court Grants Coinbase Appeal in SEC Dispute

Jimmy Aki
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A U.S. federal court has granted cryptocurrency exchange Coinbase permission to appeal a ruling in its ongoing legal dispute with the Securities and Exchange Commission (SEC).

Court Stays SEC Case Against Coinbase Pending Appeal

The decision halts all case proceedings until the Second Circuit Court of Appeals reviews the appeal.

The case hinges on whether specific crypto transactions qualify as investment contracts under the SEC’s jurisdiction.

Judge Katherine Failla’s ruling, issued on January 7 in the Southern District of New York, allows Coinbase to challenge a prior decision denying its motion for judgment.

This marks a small but significant victory in Coinbase’s legal battle with the SEC, which began in June 2023.

Judge Failla’s decision to allow the Coinbase Appeal is rooted in the broader debate over classifying cryptocurrency assets.

She noted a “possibility of reversal” in her interpretation of investment contracts, citing inconsistencies across courts in similar cases.

For example, the Ripple case—a landmark legal battle between the SEC and Ripple Labs—resulted in a split ruling in 2024. The court decided that XRP sales on exchanges did not qualify as securities, while direct institutional sales did.

Similarly, another judge reached a differing conclusion in the SEC’s case against Terraform Labs. These contradictory interpretations have created significant legal uncertainty for crypto firms.

“Although the Court does not appreciate, and will not co-sign, Coinbase’s efforts to cast aspersions on the SEC’s approach to crypto-assets, […] the fact remains that these conflicting decisions on an important legal issue necessitate the Second Circuit’s guidance,” stated Judge Failla in her order.

The SEC had accused Coinbase of operating as an unregistered securities exchange, broker, and clearing agency since 2019. The agency alleges that certain crypto transactions on Coinbase’s platform fall under its regulatory scope, a claim Coinbase disputes.

Crypto Industry and Political Implications

The Coinbase Appeal underscores broader tensions between the SEC and the crypto industry, which has long criticized the agency’s enforcement-based regulatory approach.

Coinbase’s Chief Legal Officer Paul Grewal expressed gratitude for the court’s decision, writing in a January 7 social media post, “We appreciate the Court’s careful consideration in granting this appeal.”

This legal battle coincides with broader political efforts by Coinbase and other crypto firms to influence U.S. regulatory policies.

In the lead-up to the 2024 elections, Coinbase and Ripple contributed over $90 million to Fairshake, a political action committee supporting pro-crypto candidates.

Following Donald Trump’s election victory, crypto advocates are optimistic about potential regulatory shifts.

Meanwhile, SEC Chair Gary Gensler announced plans to step down on January 20, 2025, with Commissioner Jaime Lizárraga also set to leave. Their departures could significantly change the SEC’s approach to digital assets.
Ripple’s Chief Legal Officer, Stuart Alderoty, has also weighed in on the regulatory uncertainty.

In a December 31 post on X, he stated that “a token is never a security, although it can be the subject of a security transaction,” urging regulators to adopt clearer and more consistent rules for digital assets.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.