Coinbase Seeks Court Ruling to Clarify Crypto Trades and Challenge SEC’s Authority: Bloomberg
According to the latest report from Bloomberg ReportCoinbase Inc. asked the Second Circuit that digital token transactions on its platform were not transactions covered by federal securities laws.
“There is no more pressing question in securities law today than the scope of the SEC’s authority to regulate secondary trading in digital assets,” Coinbase said in its petition to the U.S. Court of Appeals for the Second Circuit. It noted that the appeals court could “clear The cloud currently hanging over the cryptocurrency market.”
2nd Circuit ruling could speed resolution
Notably, a decision by the Second Circuit Court that token trading is not a securities transaction could hasten the end of the SEC’s case against Coinbase and loosen cryptocurrency regulations in the United States. The Trump administration has said it will provide greater regulatory flexibility to cryptocurrency companies.
The case gives the appeals court a chance to weigh in on how the “Howey test” applies to cryptocurrency transactions. Coinbase argued in its brief that transactions on its platform were not investment contracts but asset sales. Earlier this month, the U.S. District Court for the Southern District of New York granted Coinbase’s request to seek an immediate appeal in an SEC enforcement lawsuit.
The U.S. Chamber of Commerce and the Blockchain Association have filed briefs supporting the Second Circuit’s review of the Coinbase case. They stressed that the lack of clarity on whether cryptocurrency transactions qualify as investment contracts could have negative consequences as federal courts remain divided on the issue.
The need for legal clarity
The U.S. Securities and Exchange Commission (SEC) sued Coinbase in 2023, accusing the platform of operating as an unregistered securities exchange. Coinbase argued that its cryptocurrency transactions are not investment contracts and therefore are not subject to SEC jurisdiction.
Chief Legal Officer, Coinbase emphasize Legal clarification is needed on this issue. Meanwhile, Trump’s SEC established a “cryptocurrency task force” to develop a clear regulatory framework, and a U.S. appeals court has ordered the SEC to explain its refusal to provide cryptocurrency-specific rules.
