The Securities and Exchange Commission (SEC) of the United States has objected to Coinbase’s request for an interlocutory appeal in an ongoing lawsuit. The SEC claims that Coinbase is attempting to manipulate the interpretation of a “controlling question” in order to suit its own agenda. In a filing 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 are self-defeating.
The SEC also reiterated its stance that Coinbase does not agree with the Howey test, which is the agency’s standard for determining securities, and is allegedly setting up its business in ways that make it difficult to comply with existing laws. Coinbase filed an interlocutory appeal on April 12, arguing that an investment contract cannot exist without a post-sale obligation. However, the SEC disagrees with this claim, stating that Coinbase is only considering it a controlling question because it cannot provide a clear explanation of what constitutes a “contractual undertaking.”
The SEC argued that in 80 years, no court has ever required “contractual undertakings” after a sale. The SEC also stated that interlocutory review is not necessary simply because Coinbase proposes a new legal test and disagrees with the court’s rejection of that test. The SEC does not see a compelling reason to certify an appeal in this case, as Coinbase’s desire to rewrite established legal precedent to suit its own goals and needs does not provide a strong rationale.
The SEC originally sued Coinbase in June 2023, accusing the cryptocurrency exchange of violating federal securities laws by listing 13 tokens that the SEC claimed were securities. Coinbase argued that the transactions on its exchange should not be considered securities and fell outside of SEC regulations. However, the SEC holds the opposite opinion, stating that some of the transactions on Coinbase’s platform are “investment contracts” that fall under securities laws.