SEC Opposes Coinbase’s Request for Appeals Court Review of Crypto Securities Laws strengthened by Howey Test

The SEC has opposed Coinbase’s request for an appeals court to review whether conventional securities laws apply to cryptocurrencies. Coinbase, the largest US crypto exchange, had filed for permission to ask the Second Circuit Court of Appeals whether the Howey Test, used to determine securities, should apply to digital assets. However, the SEC stated that Coinbase had failed to provide a clear argument for why a new legal test is necessary, as no court has previously required additional contractual obligations beyond the three factors outlined by the Supreme Court in Howey. The SEC also claimed that Coinbase’s appeal focused on a separate legal question regarding contractual obligations rather than addressing how Howey applies to cryptocurrency transactions. Judge Katherine Polk Failla must now decide whether to grant Coinbase’s motion for interlocutory appeal. If approved, Coinbase can then present the issue to the actual appellate court. This dispute centres around the SEC’s accusation that Coinbase acted as an unlicensed broker, exchange, and clearinghouse in the US, given that certain cryptocurrencies meet the requirements of the Howey Test. The SEC’s objection was discussed in a recent article published by Coindesk. Furthermore, the SEC argued that Coinbase’s appeal aimed to produce a new legal standard that had been rejected by a lower court judge. The SEC’s response was made public on Friday. Read more about the SEC’s opinion in the Coindesk piece entitled “XRP Ruling Needs Appeals Court Review, SEC Says”. The article has been edited by Nick Baker.