Key takeaways
- The SEC’s appeal in the Ripple case demonstrates the ambiguity of the Howey Test application, Coinbase’s legal team said.
- Coinbase uses the SEC’s legal position to promote clarity in the classification of digital assets.
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The SEC’s appeal in the Ripple case has only strengthened Coinbase’s position in its ongoing legal battle with the regulator, said James Murphy, a renowned crypto lawyer.
Coinbase’s legal team is urging the New York court to quickly approve its interlocutory appeal filed in April. They point to the SEC’s recent legal decision in the Ripple case as evidence of the ambiguity of the Howey test and seek to bring in the Second Circuit Court of Appeals to resolve the issue.
Coinbase lawyers say a thorough review of the application of the Howey test in the SEC’s ongoing lawsuit against Coinbase Inc. and Coinbase Global would provide much-needed clarity on the classification of digital asset transactions.
“By granting Coinbase’s motion for interlocutory appeal, this Court would help ensure that the Second Circuit has a full account of the legal and practical implications of the SEC’s litigation position – a position that the SEC has acknowledged Just a few weeks ago caused “confusion,” Coinbase’s legal team wrote in an Oct. 4 letter, first shared by FOX Business reporter Eleanor Terrett.
An interlocutory appeal is generally not granted until final judgment. However, Coinbase’s lawyers believe the SEC’s appeal of Ripple’s court ruling could strengthen their arguments, and Judge Katherine Polk Failla may reconsider their interlocutory appeal.
On October 2, the SEC formally filed an appeal against Judge Torres’ August 7 decision that fined Ripple $125 million for improper institutional sales of XRP tokens. In response, Stuart Alderoty, Ripple’s chief legal officer, said the team was considering a cross-appeal to challenge the SEC’s decision.
According to Murphy, Judge Katherine Polk Failla’s delay in ruling on Coinbase’s initial motion for interlocutory appeal is “staggering” given that “these motions are normally decided very quickly.”
In August last year, the SEC requested an interlocutory appeal to challenge a summary ruling by Judge Analisa Torres that certain sales of XRP did not constitute securities under the Howey test. Less than two months after this decision, Judge Torres denied the SEC’s request for an interlocutory appeal.
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