A federal judge granted Coinbase an interlocutory appeal Tuesday in a lawsuit it faces from the Securities and Exchange Commission.
The stay, considered a small win by many for the cryptocurrency exchange, will be in effect until the Second Circuit answers one of crypto’s biggest legal questions: whether an investment contract requires an actual contract or not.
The SEC’s case relies on the interpretation that it does not, which makes room for the idea that certain crypto assets are investment contracts, and therefore securities to be governed by the SEC. Coinbase holds the opposite interpretation.
“Although the Court does not appreciate, and will not co-sign, Coinbase’s efforts to cast aspersions on the SEC’s approach to crypto-assets, the fact remains that these conflicting decisions on an important legal issue necessitate the Second Circuit’s guidance,” Judge Katherine Polk Failla wrote Tuesday.
Courts, the filing noted, have come to “conflicting conclusions” on the matter.
Coinbase Chief Legal Officer Paul Grewal posted on social media platform X following the judge’s decision that Coinbase “appreciate[s] the Court's careful consideration.
“On to the Second Circuit we go,” Grewal wrote.
Jeremy Hogan, a partner at the law firm Hogan & Hogan, called the development “[b]ig news in the legal crypto space” in an X post Tuesday.
“The judge in the SEC v. Coinbase case has stayed the lawsuit until the appellate 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. The granting of an interlocutory appeal is rare and indicates that the trial level judge thinks there is ‘something there.’”
The SEC filed its case against Coinbase in 2023, accusing the firm of operating an unregistered securities exchange, broker, and clearing agency for years. The agency has several other lawsuits in motion against other crypto firms and has been accused of “regulating by enforcement” under Chair Gary Gensler.
Gensler is set to leave Jan. 20, when President-elect Donald Trump takes office. Trump, a crypto-opponent-turned-ally, pledged last year to fire Gensler “on day one” of his then-unsecured second term on the grounds that Gensler has “persecuted” the burgeoning crypto industry.
Former SEC commissioner-turned-crypto-lobbyist Paul Atkins will take Gensler’s place.
The SEC declined to comment on the development.
