Exchange of cryptocurrencies If a legal issue has the potential to “significantly affect the conduct of the action,” Coinbase claimed that the issue is controlling. In an ongoing legal battle with the U.S. Securities and Exchange Commission (SEC), cryptocurrency exchange Coinbase has asked a US court to examine a particular “controlling question.”
In an April 12 filing with the U.S. District Court for the Southern District of New York, Coinbase claimed that the matter “presented here is unencumbered by factual disputes and therefore ripe for immediate review.”
The “controlling question” is whether an investment contract needs “something contractual,” according to Coinbase Chief Legal Officer Paul Grewal, who provided clarification in a post on April 12 on X. According to the exchange’s court brief, “whether a “investment contract” can exist absent any post-sale obligation is a pure, controlling question of law.”. Grewal clarified that the SEC contends that an investment contract does not necessitate contractual responsibilities following the transaction, in contrast to Coinbase’s belief to the contrary.
Following Coinbase’s attempt to have the SEC’s lawsuit against the exchange dismissed on the grounds that it functions as an unregistered exchange, broker, and clearing agency, U.S. District Judge Katherine Failla denied the request. The matter has been pending since June 2023, but it might have a big impact if the court decides to grant the interlocutory appeal.
This is due to the SEC’s claim that, “despite an absence of any alleged contractual undertakings,” Coinbase cryptocurrency transactions were investment contracts, according to Coinbase.
“The SEC’s principal claims, which make up the majority of the complaint’s factual allegations, would be resolved if the question was reversed.”. It further states that if a legal dispute has the potential to “significantly affect the conduct of the action,” it is controlling.
Grewal emphasised Coinbase’s timely submission of its appeal request, which was made just 17 days following the denial of the motion to dismiss. He did, however, defend the action by pointing out how important it is to the larger crypto sector and stressing the need of settling the disagreement over cryptocurrency transactions.
“This is crucial to our industry, thus we are requesting that the appeal be heard sooner than usual. Acting outside the legal authority granted by Congress, the SEC’s action against us and other digital asset startups casts an unfair shadow over US innovation in digital assets.
Coinbase won a significant legal battle against plaintiffs who claimed the exchange marketed and sold them unregistered securities, which is when this all happened. The US Court of Appeals for the Second Circuit decided in favour of Coinbase on April 6, according to reports, indicating that the Securities Exchange Act is not violated by secondary trades of cryptocurrencies on the company’s website.