Michaela Alvez
Federal Judge Katherine Polk Failla of the Southern District of New York has granted the request of Coinbase for an interlocutory appeal. The decision effectively pauses the U.S. Securities and Exchange Commission’s (SEC) lawsuit against the crypto exchange.
Judge Failla approved Coinbase’s request on Tuesday, paving the way for the case to advance to the Second Circuit Court of Appeals. This development is part of its broader effort to obtain clarity on the SEC’s position regarding the classification of digital assets as securities, an issue that is central to the ongoing legal dispute.
The recent ruling marks a significant setback for the SEC, which has long maintained that the sale of most cryptocurrency assets falls clearly within the scope of existing securities laws.
Judge Failla rejected the SEC’s stance, stating that the application of securities laws to cryptocurrency presents an “issue of first impression.” This designation refers to a legal question that has not been previously addressed by the courts and requires judicial interpretation for the first time.
An interlocutory appeal enables a party to contest a specific legal issue prior to the conclusion of the entire case. In this case, Coinbase plans to seek a ruling from the Second Circuit Court of Appeals on whether the SEC’s claims against the company align with existing securities regulations.
“Conflicting authority exists regarding Howey’s application to crypto-assets,” Judge Failla noted in a recent court filing. She referred to the Howey Test, a legal framework used by the SEC and federal courts to assess whether an asset qualifies as a security.
If the court agrees to hear the appeal, a judge within the circuit will decide if the case should continue in Judge Failla’s courtroom or be dismissed due to foundational legal concerns.
In 2023, the SEC filed a lawsuit against Coinbase, accusing the exchange of functioning as an unregistered exchange, broker, and clearing agency. The regulator also raised concerns about the platform’s staking and wallet services.
Coinbase CEO Brian Armstrong warned the company’s legal teams in December 2024 that it would sever ties with any firm that hires individuals involved in what he called “wrongful actions” against the crypto industry during the Biden administration.
Armstrong emphasized his stance by pointing to Milbank and explaining that Coinbase had severed ties with the law firm after it hired Gurbir Grewal, the former Director of the SEC’s Division of Enforcement. He added that exchange would not resume working with Milbank as long as Grewal remained with the firm.
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Michaela has no crypto positions and does not hold any crypto assets. This article is provided for informational purposes only and should not be construed as financial advice. The Shib Magazine and The Shib Daily are the official media and publications of the Shiba Inu cryptocurrency project. Readers are encouraged to conduct their own research and consult with a qualified financial adviser before making any investment decisions.
