SEC Halts Coinbase's Howey Test Inquiry

The U.S. Securities and Exchange Commission (SEC) has intervened to halt Coinbase’s attempt to appeal to the court in the ongoing legal battle. According to reports, the cryptocurrency exchange sought approval to question the applicability of the Howey Test to digital assets before the Second Circuit Court of Appeals.

In an attempt to halt Coinbase’s appeal, the SEC asserted on Friday that the cryptocurrency exchange hasn’t effectively demonstrated the necessity of the appeal. Nonetheless, the inquiry into the Howey Test arises from the SEC’s allegation that Coinbase functions as an unregistered broker, exchange, and clearinghouse within the United States.

In the ongoing debate, the SEC’s position centers on categorizing certain cryptocurrencies as securities. Should these digital assets fall under this classification, they would need to pass the Howey Test, mandating Coinbase to secure approval from the SEC prior to offering them for trading to customers.

However, Coinbase’s filing contends that the SEC is striving to establish a “new legal test” to categorize cryptocurrencies within the confines of existing securities precedents, a move previously opposed by a district judge.

SEC Challenges Coinbase’s Legal Clarity

Nevertheless, the SEC countered, stating that the crypto exchange has yet to articulate a singular coherent interpretation of this theory, which the SEC’s now asserts as a pivotal question. Emphasizing Coinbase’s failure to demonstrate the existence of a “controlling question” in its initial submission, the SEC’s underlined a lack of substantiation on Coinbase’s part.

Additionally, the SEC highlighted a fragmented argument within Coinbase’s submission, pointing to the cryptocurrency exchange’s assertion of concentrating on a particular legal query regarding “contractual obligations.” The SEC observed that Coinbase’s argument concerning the application of Howey to cryptocurrency constitutes an entirely separate issue altogether.

Although the SEC’s has filed a countermotion against Coinbase’s appeal request, the ultimate verdict rests with Judge Katherine Polk Failla, who presides over the ongoing case involving both parties. Should Failla rule in favor of Coinbase, the cryptocurrency exchange will advance the motion to the appeals court for further consideration.

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