Crypto exchange Coinbase asked a US appeals court to rule crypto trades are not securities in its continued fight against a Securities and Exchange Commission lawsuit.
In a Jan. 21 filing to the Second Circuit Court of Appeals, Coinbase said understanding if secondary market crypto transactions are investment contracts under securities laws is of “immense importance to the crypto industry.”
“This case presents an ideal vehicle to address that question and provide clear rules for this multi-trillion-dollar industry,” it said.
“Without it, market participants face different rules before different courts, and neither the Commission nor Congress can be certain who is responsible for the regulation of digital-asset trading,” Coinbase wrote.
The SEC sued Coinbase in June 2023, alleging the crypto exchange was an unregistered securities exchange and alleged Coinbase hadn’t registered as a broker, national securities exchange or clearing agency, evading the disclosure scheme for securities markets.
Coinbase lawyers argue in the latest petition that trades on its platform are not “securities transactions but asset sales of digital assets rather than physical ones.”
“The sellers and buyers are anonymous to each other, make no exchange or promise other than the sale of the digital asset itself, and thus have no obligation or continuing commitment to each other past the point of sale,” it argued.
Coinbase lawyers argue that the appeals court should rule on the matter to help provide regulatory clarity for the crypto industry. Source: Bloomberg Law
“Buyers also do not obtain any rights as against the asset’s issuer, as they do with securities like stocks or bonds,” they added.
The latest petition comes after New York federal judge Katherine Failla granted an order for an interlocutory appeal on Jan. 7, allowing Coinbase’s appeal.
Judge Failla said that “conflicting conclusions” from judges overseeing the SEC’s cases against Ripple Labs and Terraform Labs saw varying interpretations of what constituted a security.
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Coinbase asked the Second Circuit to accept the review of this case because “the question has divided several district courts,” and the question of whether digital asset transactions in the secondary market count as investment contracts have grounds for “difference of opinion.”
The exchange argues this appeal “presents the single best opportunity to decide the fundamental legal question of how to treat the secondary trading of digital assets.”
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