A federal judge granted Coinbase an interlocutory appeal Tuesday in a lawsuit he faces from the Securities and Exchange Commission.
The stay, seen by many as a small victory for the cryptocurrency exchange, will be in effect until the Second Circuit answers one of the cryptocurrency questions. the biggest legal questions: whether or not an investment contract requires an actual contract.
The SEC’s case relies on the opposite interpretation, which leaves room for the idea that certain crypto assets are investment contracts, and therefore securities that should be regulated by the SEC. Coinbase has the opposite interpretation.
“While the Court does not appreciate and will not co-sign on Coinbase’s efforts to disparage the SEC’s approach to cryptoassets, the fact remains that these conflicting rulings on an important legal issue require the advice of the Second Circuit”, Judge Katherine. Polk Failla wrote Tuesday.
The courts, the filing notes, have reached “conflicting conclusions” on the issue.
Paul Grewal, Coinbase General Counsel, posted on social media platform following the judge’s ruling that Coinbase “appreciates the Court’s careful consideration.”
“We are going to the Second Circuit,” Grewal wrote.
Jeremy Hogan, a partner at law firm Hogan & Hogan, called the development “(b)ig news in the legal crypto space” in a X post Tuesday.
“The judge in SEC v. Coinbase has stayed the trial until the appeals court rules on whether an ‘investment contract’ requires an actual contract,” Hogan wrote. “This is also the main point of contention in the Ripple appeal. Granting an interlocutory appeal is rare and indicates that the trial judge thinks there is “something there.”
The SEC filed against Coinbase in 2023accusing the company of operating an unregistered securities exchange, broker-dealer and clearing agency for years. The agency has several other pending lawsuits against other crypto companies and has been accused of “regulation by enforcement” under Chairman Gary Gensler.
Gensler is should leave on January 20when President-elect Donald Trump takes office. Trump, a crypto adversary turned ally, pledged last year to fire Gensler “the first day” of his then-unsecured second term on the grounds that Gensler “persecuted” the burgeoning crypto industry.
Former SEC Commissioner Turned Crypto Lobbyist Paul Atkins Will Do It take Gensler’s place.
The SEC declined to comment on this development.
