A New York District Court judge allowed Coinbase’s appeal, putting the US Securities and Exchange Commission’s lawsuit against the exchange on hold.
In an opinion and order filed Tuesday, U.S. District Judge for the Southern District of New York, Judge Katherine Polk Failla, approved Coinbase’s move to file a preliminary appeal. Interlocutory appeals, which are appeals filed before a judge makes a final decision, are rarely allowed. The case will next go to the Second Circuit Court of Appeals, where that court will likely take the case, the person said.
The SEC sued Coinbase in 2023 for allegedly operating as an unregistered exchange, broker and clearing agency. The regulator also took issue with Coinbase’s betting and wallet services. Judge Failla later sided with Coinbase on the wallet portion, rejecting the SEC’s claims.
Coinbase filed its case appeal in April, citing substantial grounds for dissent. SEC commissioners, lawmakers and the courts themselves are at odds over how the Howey test applies to transactions, Coinbase’s lawyers said in a 27-page appeal. The Howey’s test it is based on a 1946 US Supreme Court case that the SEC often cites to determine whether an asset qualifies as an investment contract and therefore a security.
“As explained in the remainder of this opinion, the Court affirms the order for preliminary appeal pursuant to § 1292(a). for differing opinions and the resolution of which would hasten the final termination of the SEC’s enforcement action,” Judge Failla said in her order on Tuesday.
Judge Failla also said there was “substantial reason for a difference of opinion” due to “conflicting authority” on how Howey applies to cryptocurrencies, saying that “the application of Howey to cryptoassets raises a difficult issue of first impression for the Second Circuit.” .”
Judge Failla also said the “conflicting decision” required understanding from the Second Circuit.
“While the Court does not appreciate and will not subscribe to Coinbase’s efforts to challenge the SEC’s approach to cryptoassets … the fact remains that these conflicting decisions on an important legal issue require guidance from the Second Circuit,” Failla said. .
Coinbase Chief Policy Officer Faryar Shirzad called Judge Failla’s order a “blow” to the SEC.
“Another blow against current SEC leadership’s efforts to sow continued uncertainty and confusion,” Shirzad said in a statement. post on X. “I thank Judge Failla for allowing the interlocutory appeal.”
The SEC declined to comment.
