Court suspends SEC case against Coinbase

On January 7, federal judge Katherine Failla granted Coinbase's motion for an interlocutory appeal, emphasizing the importance of clarity in determining which crypto assets can be classified as securities. The appeal concerns a decision that denied Coinbase's March motion to dismiss the case. The judge noted that the SEC’s arguments rely on the Howey Test, which is ambiguously applied to cryptocurrencies, as demonstrated in cases against Terraform Labs and Ripple. Failla stressed that such conflicting decisions require guidance from the Second Circuit.

Case context

The SEC filed a lawsuit against Coinbase in June 2023, accusing the exchange of operating as an unregistered securities exchange and broker, claiming that some crypto asset transactions fall under SEC jurisdiction. The crypto industry has repeatedly criticized the SEC and its chairman Gary Gensler for overstepping their authority. Conflicting court rulings, such as the decision on Ripple’s XRP token, only complicate industry regulation.

Politics and pressure

Coinbase is active not only in the courts but also in politics. The company has invested significant funds in supporting pro-crypto candidates for the 2024 elections. Together with Ripple, they have allocated over $90 million for media campaigns through the Fairshake committee.

After Republican Donald Trump’s victory in the presidential elections, Coinbase's Chief Legal Officer Paul Grewal once again called on the SEC to reconsider its regulatory approach. The upcoming departure of Gary Gensler as SEC chairman, scheduled for January 2025, may open new opportunities for reforms in the crypto industry.

What’s next?

The suspension of the SEC case against Coinbase gives the exchange time to prepare its arguments for the Second Circuit Court. Granting the appeal could set a new precedent for regulating crypto assets. The industry demands clear and fair rules, and Coinbase's actions show its readiness to use legal and political tools to protect its interests.