The US’s biggest crypto exchange by trading volume, Coinbase had filed a request with a New York District Court to review a crucial “controlling question” raised by the US Securities and Exchange Commission (SEC). The crypto exchange’s latest move had made the legal battle against the exchange intense.
Coinbase legal head exposes watchdog’s jurisdiction
Paul Grewal, Chief legal officer of Coinbase in a post mentioned that they filed a brief asking the Court’s permission to seek an interlocutory appeal. The controlling question here is whether an “investment contract” requires something contractual. Coinbase thinks it does, while the SEC disagrees.
He stated the defendant is asking to take this up on appeal earlier than normal as it’s a critical matter for the industry.
Coinbase legal officer highlighted that the US SEC’s action against the exchange and other digital asset linked companies goes way beyond the legal authority granted by Congress. This leads to an unjust cloud over digital asset innovation in the country.
Grewal added that this is not at all funny thing as they are not alone in thinking the question of when a crypto transaction might be an “investment contract” warrants an interlocutory appeal.
It is important to note that the commission itself has made identical arguments earlier.
He mentioned that in the US SEC Vs Ripple case, the commission said specifically there is a “controlling question[] of law to which there are substantial grounds for difference of opinion.” It noted the “industry-wide significance” of the question presented.
In the end, Coinbase’s legal head indicated that digital assets aren’t going anywhere. Coinbase will continue to push for clarity for the entire industry and for the 52 million Americans who own digital assets.
What happened earlier?
This development follows District Judge Katherine Failla’s, where she announced a decision to deny Coinbase’s motion to dismiss the SEC’s lawsuit. It accused the exchange of operating as an unregistered exchange, broker, and clearing agency.
Coinbase had recently bagged a legal victory in a separate civil lawsuit confirming that secondary sales of cryptos on its platform do not violate the Securities Exchange Act. The United States Court of Appeals for the Second Circuit ruled in favor of the exchange.
Notably, the classification of crypto transactions as investment contracts falls under the SEC’s jurisdiction. However, it necessitates proper registration under existing laws. While the commission maintains that the majority of digital assets are securities, industry peers argue that once tokens enter secondary markets, detached from their issuing entities.
