Coinbase, one of the top cryptocurrency exchanges, has filed a motion requesting permission to file an interlocutory appeal to challenge a recent ruling by Judge Katherine Polk Failla.
The motion pertains to the ongoing lawsuit between Coinbase and the U.S. Securities and Exchange Commission (SEC) regarding the classification of certain digital assets as investment contracts.
Read Also: Ripple CTO Analyzes Court’s Rejection of Judge Torres XRP Sales Distinction; Deaton Reacts
The crux of the dispute lies in how the Howey Test, a legal framework used to determine whether an offering constitutes an investment contract, applies to cryptocurrency. Judge Failla referenced a previous opinion by Judge Jed Rakoff in the TerraForm Labs case when she denied Coinbase’s initial attempt to dismiss the SEC’s case.
Rakoff states that some digital assets could be considered investment contracts under the Howey Test if they exist within a broader ecosystem that promotes profit-sharing through the investment of funds in a common enterprise.
According to Eleanor Terrett, a Fox Business Journalist, Coinbase argues that the conflicting interpretations of the Howey Test by Judges Rakoff and Failla present a “controlling question of law.” This legal concept is a key requirement for obtaining permission to pursue an interlocutory appeal, which is an appeal filed before a final judgment is reached in a case.
The difficulty of securing an interlocutory appeal was recently demonstrated by the SEC’s unsuccessful attempt to challenge Judge Analisa Torres’ decision in the Ripple case. Torres had ruled that XRP was not an investment contract based on programmatic sales, a concept distinct from the broader ecosystem argument presented by Rakoff.
Bill Morgan Weighs In
Bill Morgan, a prominent lawyer and outspoken cryptocurrency supporter, commented on the potential implications of Coinbase’s motion. He suggests that if Coinbase is granted permission to appeal and subsequently loses, it could strengthen the SEC’s position if the regulator appeals against Judge Torres’s ruling in the Ripple case.
However, Morgan also cautions against overstating the inconsistency between the two judges’s decisions, suggesting that Terrett and her colleague Chad Gasparino may be exaggerating the differences.
If Coinbase is granted leave to file an interlocutory appeal and loses the appeal it may improve the SEC’s chances of a successful appeal on the finding of Judge Torres that programmatic sales of XRP are not investment contracts, although I believe assertions about the… https://t.co/tW7QqPES0g
— bill morgan (@Belisarius2020) April 13, 2024
Read Also: Ripple Files Opposition To the SEC’s Move for Interlocutory Appeal Approval
Bill Morgan once stated that the war over XRP’s security status was over. However, developments like the Coinbase ruling might have shifted that stance. Clear and consistent application of the Howey Test to digital assets is crucial for determining regulatory oversight and compliance requirements.
The outcome of Coinbase’s motion for interlocutory appeal and any subsequent appeal decisions will likely have a major impact on the future of cryptocurrency regulation in the U.S.
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