Coinbase Seeks Interlocutory Appeal in SEC Battle

In the latest development of a long-running legal saga, Coinbase has asked the judge presiding over its battle with the SEC to grant its request for an interlocutory appeal. This appeal, which allows for a review before a case's resolution, comes in light of the SEC's recent appeal in its separate case against web3 payments firm Ripple.

Coinbase's request for an interlocutory appeal was initially filed in early April. The company seeks to clarify how the Howey Test, a traditional standard determining what counts as a security based on a 1946 Supreme Court ruling, applies to digital assets.

"That Members of Congress, Senators, and regulatory agencies have divided in answering [the question] bespeaks the difficulty of the subject matter, and the divergent judicial outcomes illustrate the point," Coinbase's lawyers wrote.

Although the SEC filed a letter a month later asking for the appeal to be denied, arguing there was "no substantial ground for difference of opinion," Judge Katherine Polk Failla of New York has yet to make a ruling on the appeal request.

Coinbase is now urging Judge Failla to reconsider its motion for interlocutory appeal due to the SEC's recent appeal in the Ripple case. The crypto exchange contends that presenting both cases to the Second Circuit simultaneously would provide the court with a comprehensive understanding of the legal and practical implications of the SEC's position.

"Coinbase remains confident that we are right on the facts and the law. Given the SEC’s recent appeal in the Ripple case, allowing the Second Circuit to have as complete a picture as possible will be important as it considers how Howey applies to secondary market transactions. We appreciate the Court's careful consideration," a Coinbase spokesperson told The Block.

Coinbase's lawyers emphasized, "The SEC has conceded, and now reconfirms by its appeal in Ripple, that the issues presented by Howey’s application to secondary-market digital asset transactions are of 'industry-wide significance.' Prompt and complete appellate review is urgently needed." The SEC was not immediately available for comment.

Interlocutory appeals are rare, but the SEC's Ripple appeal strengthens Coinbase's argument, according to cryptocurrency-focused attorney James "MetaLawMan" Murphy, who termed the filing a "smart move." Murphy noted, "It is astounding that Judge Failla never ruled on Coinbase’s original motion for interlocutory appeal filed back in April. Those motions are normally ruled on very quickly."