The exchange wants an appeals court to decide if crypto is subject to the same rules as regular securities. Coinbase is sure that they won’t.
American officials told the appeals court not to listen to Coinbase’s request to reevaluate how traditional securities laws apply to cryptocurrencies.
Coinbase, the biggest cryptocurrency exchange in the US, asked the Second Circuit Court of Appeals for permission to ask if the Howey Test, which is a standard set by the Supreme Court for stocks, applies to digital assets. Coinbase is betting that something bad will happen.
The U.S. Securities and Exchange Commission said on Friday that according hasn’t made a strong case for this need.
The pivotal inquiry lies at the heart of the SEC’s accusation that Coinbase functions as an unregistered broker, exchange, and clearinghouse within the United States.Â
According to regulators, if certain cryptocurrencies qualify as securities, thereby meeting the criteria outlined in the Howey Test, then Coinbase was obligated to seek approval from the SEC before enabling customers to trade them.
In its submission, the SEC contended that Coinbase was attempting to establish a “novel legal standard” regarding how cryptocurrencies could align with established securities precedents, a notion previously dismissed by a district court judge.Â
“Coinbase continues to lack a cohesive narrative for this concept, now purportedly representing a pivotal question,” the filing stated. “
This is hardly surprising – over eighty years, no court has ever demanded post-sale ‘contractual obligations’ or anything beyond the three criteria expressly delineated by the Supreme Court in Howey.”
Furthermore, the filing argued that Coinbase had not effectively demonstrated the presence of a “pivotal question” in its submission.Â
The SEC also countered Coinbase’s assertion that its appeal focused on a specific legal query concerning “contractual obligations,” contending that the actual argument about the application of the Howey Test to cryptocurrencies posed an entirely distinct question.
“Similarly, in an effort to establish precedent for numerous cases, Coinbase once again shifts the focus away from the ‘contractual obligations’ issue, this time to the ‘[a]pplication of Howey to secondary-market crypto transactions,'” the filing asserted.
Judge Katherine Polk Failla, overseeing the SEC’s litigation against Coinbase, will need to adjudicate on the motion for an interlocutory appeal. Should she side with Coinbase, the exchange will have the opportunity to escalate the motion to the appellate court.
News Source: Coindesk