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Key Takeaways:

Coinbase has requested a U.S. court to immediately address a key legal question regarding whether an “investment contract” can exist without post-sale obligations, as part of its ongoing lawsuit with the SEC.
The request follows Judge Katherine Failla’s refusal to dismiss the SEC’s allegations that Coinbase operates as an unregistered exchange, broker, and clearing agency.
Coinbase argues that resolving this legal question could dismiss the main claims of the SEC and significantly impact the entire cryptocurrency industry in the U.S.

In a recent legal filing, cryptocurrency exchange Coinbase has urged a U.S. court to examine a pivotal legal question posed by the U.S. Securities and Exchange Commission (SEC) amidst its ongoing lawsuit.

The company insists this legal query is clear-cut and ripe for immediate adjudication.

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

In a document submitted on April 12 to the U.S. District Court for the Southern District of New York, Coinbase argued that the issue at hand is devoid of factual disputes, setting the stage for an expedited review.

Paul Grewal, Coinbase’s Chief Legal Officer, elaborated in an online post that the core of the debate focuses on whether an investment contract necessitates specific contractual obligations post-sale.

He stated, “Whether an ‘investment contract’ can exist absent any post-sale obligation is a pure, controlling question of law.”

We’re asking to take this up on appeal earlier than normal because it's critical to our industry. The SEC’s action against us and other digital asset companies goes way beyond the legal authority granted by Congress and puts an unjust cloud over US digital asset innovation. 2/5
— paulgrewal.eth (@iampaulgrewal) April 13, 2024

This legal challenge follows a decision by U.S. District Judge Katherine Failla to reject Coinbase’s motion to dismiss the SEC’s allegations.

The SEC contends that Coinbase has been operating as an unregistered exchange, broker, and clearing agency.

Approval of the interlocutory appeal by the court could have a significant impact on the trajectory of the case, which began in June 2023.

Coinbase files interlocutory appeal in its case against the SEC https://t.co/4RrQ1AqxlS
— The Block (@TheBlock__) April 13, 2024

Coinbase has countered the SEC’s claims, arguing that cryptocurrency transactions on their platform do not involve the contractual commitments typically associated with investment contracts.

“Reversal on the question presented would dispose of the SEC’s principal claims, which account for the bulk of the complaint’s factual allegations,” the company noted.

Coinbase will file an interlocutory appeal in the SEC case. In its motion, Coinbase will appeal whether the U.S. SEC has the authority to treat digital asset transactions as investment contracts. If the case is allowed to appeal, the original trial proceedings will be suspended…
— Wu Blockchain (@WuBlockchain) April 13, 2024

In his statements, Grewal highlighted the strategic importance of filing for the appeal merely 17 days after the dismissal motion was denied.

He emphasized the broader implications for the cryptocurrency industry, aiming for a swift resolution to a dispute that, according to Coinbase, extends beyond the legal limits set by Congress and adversely affects American digital asset innovation.

The appeal comes on the heels of a significant legal win for Coinbase, where the United States Court of Appeals for the Second Circuit sided with the exchange.

.@coinbase files interlocutory appeal in its case against the SEC.

In its motion, the exchange will be appealing the issue of whether the SEC has authority over digital asset transactions as investment contracts.https://t.co/tXzlhTTfvm pic.twitter.com/i1yTjrTqyk
— ICO Drops (@ICODrops) April 13, 2024

This ruling affirmed that secondary sales of cryptocurrencies on Coinbase do not breach the Securities Exchange Act.