Coinbase Intensifies Legal Defense in SEC Battle, Calls for Reconsideration of Interlocutory Appeal

The exchange's legal team is urging Southern District of New York Judge Katherine Failla to review the appeal in light of the SEC's recent decision

Coinbase is ramping up its legal defense in its battle with the U.S. Securities and Exchange Commission (SEC) over the exchange’s April 2024 interlocutory appeal.

Coinbase’s legal team is urging Southern District of New York Judge Katherine Failla to reconsider the appeal in light of the SEC’s recent decision to challenge the verdict in the Ripple lawsuit.

The SEC initially sued Coinbase in June 2023, accusing the exchange of selling unregistered securities. In a letter dated Oct. 5, Coinbase’s attorneys pointed out that the regulator’s notice of appeal in the Ripple case acknowledges the ambiguity surrounding the application of the Howey Test — a set of criteria used to determine if a financial instrument qualifies as a security — to secondary-market transactions involving digital assets.

The letter highlighted the “industry-wide significance” of this issue, urging the court to grant prompt and thorough appellate review.

“The SEC has conceded, and now reconfirms by its appeal in Ripple, that the issues presented by Howey’s application to secondary-market digital asset transactions are of industry-wide significance,” Coinbase’s legal counsel stated, pressing the urgency of the appeal.

Noted financial services lawyer James Murphy noted that it is unusual for the court not to have ruled on Coinbase’s original motion for an interlocutory appeal filed in April, suggesting that such motions are typically handled more swiftly.

However, he added that Coinbase’s legal team appears to be making a strong case for a reconsideration, especially by tying Coinbase’s case to the broader regulatory concerns being raised in the Ripple lawsuit. Murphy pointed out that the court has been actively engaged in the SEC vs. Coinbase case throughout 2024.

“Both parties have filed several motions and engaged in multiple hearings before Judge Failla. The court has also issued several key rulings, including denying the SEC’s motion to dismiss the case and granting Coinbase’s motion to amend its complaint,” the lawyer explained in an email to Law360 Pulse.

“These rulings have set the stage for the upcoming discovery phase and, ultimately, a bench trial that is currently scheduled to begin in February 2025. The parties are awaiting a decision from the Second Circuit on Coinbase’s interlocutory appeal, which could impact the further proceedings in the case.”

Recent developments in SEC vs. Coinbase

* The SEC recently petitioned the court for a Feb. 2025 extension to produce discovery documents that were originally due by Oct. 18, 2024. This extension will further delay the proceedings, as the discovery documents are critical to the ongoing legal battle.

* On Sept. 24, a panel of judges criticized the SEC’s failure to provide clear rules on digital assets, following Coinbase’s 2022 request for regulatory clarity. In addition, Coinbase has petitioned the court to compel the Commodities Futures Trading Commission (CFTC) to release its communications with token issuers, believing these documents could shed light on which digital assets fall under securities regulation.

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