Coinbase Challenges SEC: Interlocutory Appeal Sparks Legal Battle Over ‘Investment Contract’ Definition

• Coinbase CLO Paul Grewal has reiterated that crypto assets are here to stay, thus the SEC should focus on providing clear regulatory frameworks.
• The question at hand between the US SEC and Coinbase is whether an investment contract requires actual contractual detailing. 

The legal battles in the United States between the Securities and Exchange Commission (SEC) and several crypto firms led by Coinbase Global and Ripple Labs have been a lifeline hope for the web3 industry in the region. Despite the approval of spot Bitcoin ETFs earlier this year, regulators led by Senator Cynthia Lummis have pushed the Senate Banking Committee to enact clear crypto regulatory frameworks before the upcoming elections. 

As Crypto News Flash previously reported, China through Hong Kong now has approved spot Bitcoin and Ether ETFs to allow its local investors to diversify their portfolios. The demand for digital assets has been escalated by the heightened global conflicts led by the Middle East.

Coinbase Global Fights SEC Back Via Interlocutory Appeal

In June last year, the US SEC charged Coinbase Global with operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency. As Crypto News Flash previously pointed out, the US SEC also charged Coinbase Global for failing to register its crypto staking-as-a-service program, thus putting most of the altcoins in jeopardy.

With vast resources at its disposal, Coinbase’s legal team led by Chief Legal Officer, Paul Grewal, has severally argued that the agency has constantly overstepped its mandate and failed to provide clear crypto regulatory rules. On April 12, 2024, Coinbase’s legal team filed a memorandum of law in support of Coinbase’s motion to certify the interlocutory appeal.

Furthermore, Coinbase attorneys believe the court should disregard the case for lack of merits, especially regarding the Howey test. According to Grewal, Coinbase Global is for investment contracts to have something contractual, which the US SEC disagrees with. Moreover, crypto exchanges involve willing sellers and buyers without any binding contract apart from smart contracts.

Today @Coinbase filed a brief asking the Court’s permission to seek an interlocutory appeal in our @SECGov case on this controlling question: whether an “investment contract” requires something contractual – we think it does, the SEC disagrees. 1/5 https://t.co/M5HgMQxCLF

— paulgrewal.eth (@iampaulgrewal) April 13, 2024

Any Impact on the SEC vs Ripple Case?

While the US SEC intends to ask the presiding Judge to fine Ripple $2 billion in a possible settlement deal, Ripple executives led by CEO Brad Garlinghouse have vowed to fight the agency. Furthermore, Judge Analisa Torres ruled that XRP sales on crypto exchanges do not constitute investment contracts.

If Coinbase successfully convinces the court that the investment contract requires something contractual, Ripple will have a walkover in the ongoing lawsuit.

Market Picture

The cryptocurrency market has completed the first major correction in the 2024 bull cycle with less than a week before the much-anticipated Bitcoin halving. The demand for digital assets has overridden the governments’ bid to control the industry through siloed regulatory frameworks. 

According to the latest market data, the total crypto market cap gained over 4 percent in the past 24 hours to hover around $2.53 trillion on Monday. Bitcoin price had rebounded over 3.5 percent to trade slightly above $66,273.

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