The US Securities and Exchange Commission (SEC) asked the court to reject cryptocurrency exchange Coinbase's appeal, stating that “there is no significant basis for disagreement.”
Coinbase last month filed a temporary appeal following a judge's decision to allow a lawsuit involving the SEC and Coinbase to proceed without dismissal.
The appeal was based on differing interpretations of the Howey Test, a 1946 U.S. Supreme Court case frequently used by the SEC to determine whether an asset qualifies as an investment contract and therefore a security.
Coinbase's dislike of the Howey Test and the current framework for securities regulation does not provide a compelling reason to prematurely approve an appeal in this case, the SEC said in a statement today. The SEC also stated that Coinbase's decision to regulate its business in ways that could make it costly to comply with existing laws and its desire to rewrite decades of established legal precedent to suit its policy goals and business needs are not valid grounds for an appeal.
The SEC also noted, however, that an appeal filed before a case is concluded is unlikely to be granted. The failure of the SEC's appeal in the case it filed against Ripple last year was also an indication of this.
In her decision to proceed with the case, Judge Katherine Polk Failla disagreed with Coinbase's argument that investment agreements need a formal contract. He noted that when a customer purchases a token from Coinbase, they are not just purchasing a token, they are also purchasing that “token's digital ecosystem.”
In order for Coinbase's appeal to proceed, Judge Failla must grant leave to appeal. If the appeal is allowed to proceed, the remainder of the case will be put on hold in the trial court and the exchange will then await a decision from the U.S. Court of Appeals for the Second Circuit.
*This is not investment advice.