The cryptocurrency exchange Coinbase has asked for an interlocutory appeal on a “controlling question” in the ongoing lawsuit, but the United States Securities and Exchange Commission (SEC) has rejected the request, claiming that Coinbase is trying to alter the interpretation of the question itself. In a document filed with the U.S. District Court for the Southern District of New York on May 10, the SEC stated that “Coinbase’s attempts to manipulate the question for appeal to shoehorn it into a certifiable question under 28 U.S.C. § 1292(b) are self-defeating.” The SEC additionally stated that Coinbase “does not like” the Howey test, which is the agency’s criterion for defining what constitutes a security, and the present securities regulatory framework, alleging that Coinbase has structured its operations in a way that could “make it costly” to abide by the law as it is.
“Coinbase just does not like the answer. Having made the weather, Coinbase cannot now complain that it is raining.”
That follows Coinbase’s April 12 interlocutory appeal, in which the company claimed that the absence of a post-sale obligation was incompatible with the existence of an investment contract. The SEC contests this, and Coinbase argues that whether it does so or not is a controlling question, a crucial legal matter that could significantly impact the case’s conclusion.
However, the SEC argued that Coinbase is only claiming this to be a controlling question as the exchange can’t provide a clear explanation of what constitutes a “contractual undertaking.”
“Coinbase remains unable to advance a single, coherent version of this theory, which it now claims presents a controlling question,” the SEC asserted.
However, the SEC argued that in 80 years, no court has ever demanded “contractual undertakings” after a sale.
“Interlocutory review is not warranted simply because Coinbase proposes a new legal test and disagrees with the Court’s rejection of that test,” the SEC noted.
“But Coinbase’s decision to do so, and its desire to rewrite settled, decades- old legal precedent to fit its own policy goals and business needs provides no compelling reason to prematurely certify an appeal in this case,” it added.
In June 2023, the SEC filed a lawsuit against Coinbase, claiming that by offering 13 tokens that it claimed were securities, the cryptocurrency exchange had broken federal securities regulations. In an attempt to circumvent SEC restrictions, Coinbase contended that the transactions on its exchange shouldn’t be regarded as securities. On the other hand, the SEC is of the opinion that… According to court filings on March 27, the SEC claimed that “at least some of the transactions on Coinbase’s platform and through related services constitute “investment contracts,” which the federal securities laws have long recognized as securities.”