A US judge has paused the legal process in the case between Coinbase and the SEC, allowing the cryptocurrency exchange to seek an opinion from the high court on a key legal question.
On January 7, District Judge Katherine Polk Failla granted Coinbase’s request to appeal a substantive issue to the court of appeals.
The Legal Battle Between Coinbase and the SEC Will Set a Precedent for the US Cryptocurrency Industry
Service appeal will clarify whether digital assets traded on Coinbase are considered securities or not. It will also determine whether transactions involving these assets require investment contracts under the Howey criteria.
Most importantly, the proceedings will be suspended until the appeal is resolved.
“Despite the SEC’s strong objections, Judge Failla granted our request for temporary leave to appeal and temporarily stayed litigation in the district court. We appreciate the court’s careful consideration. Advance to 2nd Circuit,” write Paul Grewal, Chief Legal Officer of Coinbase.
Coinbase has asserted that the tokens traded on its platform do not meet the legal criteria of securities. The company argues that the Token issuer has no obligation to the purchaser, which does not satisfy the definition of a security under the Howey criteria.
Judge Failla also acknowledged this argument. She argued that this legal question provides considerable basis for differing opinions. Resolving this issue could hasten the end of the SEC’s enforcement action.
This decision comes at a crucial time for the cryptocurrency sector. The incoming administration of President-elect Donald Trump signals potential policy changes for the industry. Under the leadership of Gary Gensler, the SEC has initiated multiple high-profile lawsuits against major cryptocurrency platforms over securities laws.
Now, Paul Atkins, who is nominated to chair the SEC, will likely give lower priority to crypto-related lawsuits that were initiated under previous leadership.
The SEC filed a lawsuit against Coinbase in 2023. They alleged that the company facilitated the trading of at least 13 tokens that the agency said should have been registered as securities.
Although the lawsuit continued after the 2024 ruling, claims related to Coinbase’s wallet service were dismissed. Coinbase has also criticized the SEC for approving its public listing while the latter challenged the legality of its operations.
A String of Regulatory Victories
In another development, Coinbase won a license from New York regulators on the same day. This approval allows the exchange to offer more new products to New Yorkers.
Coinbase also shared new allegations regarding efforts by federal regulators to limit banks’ participation in cryptocurrency operations.
These allegations have increased scrutiny over regulatory practices, sparking accusations of a new effort, dubbed “Operation Stop 2.0,” to suppress the cryptocurrency industry .
“Michael Barr has completely failed in his duties as Vice President of Oversight in every respect, authorizing Operation Prevent 2.0 and unlawfully increasing his power at the expense of charges of Wyoming’s digital asset industry,” Senator Cynthia Lummis recently said write on X (formerly Twitter).
While Congress considers new legislation to clarify the regulatory framework for digital assets, the industry is advocating for policies that support its development. While cases like this may eventually reach the Supreme Court, the outcome could lose its significance if lawmakers establish clear rules on how cryptocurrencies are regulated in the United States. .
