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SEC Hits Back at Coinbase (COIN) Attempt to Get Appeals Court to Answer Key Crypto Question
U.S. regulators said an appeals court should not grant Coinbase’s request to review how — or whether — conventional securities rules apply to cryptocurrencies.
Coinbase, the largest crypto exchange in the US, asked permission asking the Second Circuit Court of Appeals whether the Howey Test, a long-standing Supreme Court assessment of securities, should be applied to digital assets. Coinbase hopes not.
Coinbase has not successfully argued that this is necessary, the US Securities and Exchange Commission said on Friday.
The issue is at the heart of the SEC’s accusation that Coinbase operates as an unregistered U.S. broker, exchange and clearinghouse. If some cryptocurrencies are securities – thus meeting the Howey Test – that means Coinbase needed to get approval from the SEC before allowing customers to trade them. , according to regulators.
In your filingthe SEC argued that Coinbase was trying to create a “new legal test” for how crypto could fit into existing securities precedent that a district court judge had already rejected.
“Coinbase remains unable to present a single, coherent version of this theory, which it now claims presents a controlling issue,” the document said. “This is not surprising – in eighty years, ‘no court’ has ever required post-sale ‘contractual commitments’ or anything other than the three factors expressly enumerated by the Supreme Court in Howey.”
The lawsuit went on to argue that Coinbase did not successfully argue that there was a “control issue” in its process.
The SEC also argued that while Coinbase’s appeal says it is focusing on a specific legal question about “contractual obligations,” its actual argument about Howey’s application to crypto is a completely different question.
“Similarly, trying to meet the ‘precedent value for a range of cases’ factor, Coinbase again moves away from the ‘contractual obligations’ issue, this time to ‘[h]as Howey applies to secondary market cryptographic transactions,'” the document said.
Judge Katherine Polk Failla, who is overseeing the SEC’s case against Coinbase, will have to rule on the appeal request. If it sides with Coinbase, the exchange could send the motion to the appeals court itself.