Coinbase Secures Appeal in Legal Battle with SEC, Halting Lawsuit Progress

Coinbase has achieved a partial win in its ongoing legal battle with the U.S. Securities and Exchange Commission (SEC).

A federal judge has granted Coinbase permission to pursue a narrow appeal that challenges the SEC’s accusations of improperly handling unregistered securities.

Judge Katherine Polk Failla of the U.S. District Court for the Southern District of New York approved Coinbase’s request for an interlocutory appeal on Tuesday.

This legal mechanism allows a higher court to weigh in on a specific question of law before the case proceeds further.

SEC Case Against Coinbase Remains on Hold

While this appeal is under consideration by the U.S. Court of Appeals for the Second Circuit, the rest of the SEC’s lawsuit against Coinbase will remain on hold.

At the core of the legal dispute is whether certain digital tokens traded on Coinbase’s platform qualify as securities under U.S. law.

The SEC argues that Coinbase violated securities regulations by allowing the trading of these tokens without proper registration.

Coinbase, on the other hand, contends that these tokens fail to meet the criteria for securities as defined by the Howey Test—a legal standard established by a landmark Supreme Court case.

Coinbase’s defense emphasizes that the issuers of these tokens do not owe obligations to buyers, which is a critical element under the Howey framework.

Judge Failla acknowledged the complexity of the legal issues involved, noting the conflicting rulings from different federal courts on similar cases.

She stated that resolving this question of law is crucial for advancing the case and providing clarity to the crypto industry.

Paul Grewal, Coinbase’s Chief Legal Officer, expressed gratitude for the court’s decision. “We appreciate the court’s careful consideration,” he wrote on X (formerly Twitter). “On to the Second Circuit we go.”

Over the strenuous objection of @SECGov, Judge Failla has GRANTED our motion for leave to pursue an interlocutory appeal and STAYED the district court litigation. We appreciate the Court's careful consideration. On to the Second Circuit we go. pic.twitter.com/FuZ2jcYvfF

— paulgrewal.eth (@iampaulgrewal) January 7, 2025

The SEC, led by crypto skeptic Gary Gensler, has yet to comment on the ruling.

Gensler is set to step down in January 2025 when the new administration takes office, potentially paving the way for a shift in the SEC’s stance toward the crypto industry.

A Republican-led SEC is expected to adopt a more industry-friendly approach, which could alter the trajectory of this case and others like it.

Ultimately, the question of what constitutes a crypto security may reach the Supreme Court.

US Crypto Owners Expect Less Regulation

As reported, cryptocurrency enforcement in the United States may ease under the upcoming administration of Republican President-elect Donald Trump, with regulatory priorities expected to shift.

Speaking at a legal conference in New York, current and former senior government lawyers indicated that while financial fraud cases will still be pursued, the Justice Department’s focus will likely move toward immigration enforcement, a key campaign promise of Trump.

Scott Hartman, co-chief of the securities and commodities task force at the U.S. Attorney’s Office in Manhattan, revealed that fewer resources will be allocated to policing cryptocurrency crimes.

As of late, the SEC has been facing growing criticism due to its “regulation-by-enforcement” approach to the crypto industry.