In a significant development within the cryptocurrency legal landscape, Judge Katherine Polk Failla of the U.S. District Court for the Southern District of New York has granted Coinbase’s motion for an interlocutory appeal in its ongoing case with the U.S. Securities and Exchange Commission (SEC).
The decision, issued on January 7, 2025, was shared on X by Coinbase Chief Legal Officer Paul Grewal, and it also stays district court proceedings while the appellate court considers the matter.
Over the strenuous objection of @SECGov, Judge Failla has GRANTED our motion for leave to pursue an interlocutory appeal and STAYED the district court litigation. We appreciate the Court's careful consideration. On to the Second Circuit we go. pic.twitter.com/FuZ2jcYvfF
— paulgrewal.eth (@iampaulgrewal) January 7, 2025
The SEC initiated its lawsuit against Coinbase, alleging that certain digital assets listed on the platform qualify as securities under federal law. Coinbase, however, has consistently challenged the SEC’s position, asserting that the assets in question do not meet the criteria of an “investment contract” as defined by the Howey test.
The Interlocutory Appeal
An interlocutory appeal allows a party to seek an appellate review of specific legal questions before the case proceeds to trial. In this instance, Coinbase’s appeal focuses on the critical question of whether an “investment contract” under U.S. securities law requires the existence of a contractual agreement between parties. This issue lies at the heart of not only Coinbase’s case but also broader disputes involving the regulatory classification of digital assets.
The court’s decision to grant the appeal is noteworthy, as interlocutory appeals are rarely approved. According to well-respected attorney Jeremy Hogan, “The granting of an interlocutory appeal is rare and indicates that the trial level judge thinks there is ‘something there.’”
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Implications for the Crypto Market
By staying the district court litigation, the court has halted further discovery and proceedings until the appellate court resolves the appeal. This pause allows the appellate court to provide clarity on the definition of an investment contract, a determination that could significantly influence not only this case but also the SEC’s broader regulatory efforts in the cryptocurrency space.
However, Coinbase’s decision has long been criticized by other attorneys. The SEC has appealed the ruling from July 2023 that determined that XRP itself is not a security and programmatic token sales are not investment contracts.
In early 2024, Bill Morgan noted that Coinbase losing the appeal would strengthen the SEC’s case against Ripple, and now that Coinbase’s interlocutory appeal has been granted, the crypto world will be watching eagerly for the outcome.
However, things could take an entirely different turn, as the SEC will soon be under a new crypto-friendly administration, and experts including Hogan believe the new administration will dismiss the Ripple lawsuit and similar non-fraud lawsuits and provide proper regulation for the crypto market to foster growth and innovation.
Disclaimer: This content is meant to inform and should not be considered financial advice. The views expressed in this article may include the author’s personal opinions and do not represent Times Tabloid’s opinion. Readers are urged to do in-depth research before making any investment decisions. Any action taken by the reader is strictly at their own risk. Times Tabloid is not responsible for any financial losses.
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