America’s leading crypto exchange Coinbase has managed to score a massive legal win in its longstanding brawl with Gary Gensler’s Securities and Exchange Commission (SEC). Coinbase has been granted permission to pursue a rare interlocutory appeal while pausing the rest of the case, a move crypto leaders are already hailing as a major victory. Judge Grants Coinbase’s Request For Interlocutory Appeal In a Jan. 7 filing, Judge Katherine Polk Failla of the Southern District of New York granted an appeal of an order denying Coinbase’s motion for judgment. Judge Failla noted the clash in rulings from the federal judges overseeing the SEC’s civil cases against Ripple and Terraform Labs on similar questions and determined that “conflicting decisions on an important legal issue necessitate the Second Circuit’s guidance.” The District Judge ordered all proceedings in the legal battle between the securities watchdog and the leading U.S. exchange be stayed until the Second Circuit ruled on an interlocutory appeal over the order. At the heart of the case is whether “certain transactions involving crypto-assets qualified as investment contracts within the SEC’s regulatory purview” — i.e., as securities. Judge Failla said she is granting the April 2024 request “because it presents a controlling question of law regarding the reach and application of Howey to crypto-assets, about which there is substantial ground for difference of opinion, and the resolution of which would advance the ultimate termination of the SEC’s enforcement action.” An immediate interlocutory appeal would “materially advance” the termination of the litigation because a significant portion of the regulator’s claims against Coinbase might be dismissed, the judge added. “We appreciate the court’s careful consideration,” Coinbase Chief Legal Officer Paul Grewal said in a post on Twitter (aka X). “On to the Second Circuit, we go.” “Big Win” For Entire Crypto Community The SEC lodged the enforcement action against Coinbase in June 2023, claiming that the exchange had operated as an unregistered securities exchange, broker, and clearing agency since 2019. Many in the cryptocurrency sphere have lambasted the SEC and its chair Gensler, specifically, for overreaching its authority with civil cases. As observed by Jeremy Hogan, partner at Hogan & Hogan, the granting of such an interlocutory appeal is “rare and indicates that the trial level judge thinks there is ‘something there.’” Meanwhile, Kraken’s chief legal officer, Marco Santori, suggested that the news was a “big win” for the entire crypto space. “Huge congratulations to the Coinbase Legal Team. Not only will the Second Circuit consider dismissing the SEC’s case, but the trial court will pause it in the meantime. Big win for the whole ecosystem,” Santori wrote.
