Coinbase Cites Binance Ruling to Request Interlocutory Appeal in SEC Lawsuit

Coinbase CLO Raises Question on District Court Judgments

Coinbase Chief Legal Officer Paul Grewal highlighted a significant discrepancy in the judicial treatment of crypto transactions in the United States. Grewal said that two learned district courts analyzing “economically identical transactions” of the two biggest US exchanges have 180-degree diametrically opposite conclusions on whether the transactions qualify as securities transactions.

He also slammed the SEC’s litigation-focused approach toward crypto regulations, adding that there are inconsistent rules for market participants across different jurisdictions. “The result of the SEC’s litigation-focused approach to crypto regulation is that market participants now face different rules, not only in different courts in this District but in different federal courts around the country,” noted Grewal.

While emphasizing the uniformity in the legal standards, Grewal stated that liability shouldn’t depend on the court suing the exchange or the judge being assigned the case.

Coinbase Files Notice for Interlocutory Appeal

In a recent development, crypto exchange Coinbase has filed a notice requesting an interlocutory appeal, referencing Judge Jackson’s decision in the Binance BNB case. Last week, Judge Jackson ruled that Binance’s BNB token sale in secondary markets does not qualify as securities. Consequently, Coinbase is questioning how two different judges can interpret regulatory rules differently for two exchanges.

HIGHLIGHTS

• Coinbase has questioned how regulatory rules can differ so greatly between two judges overseeing similar cases for different exchanges.
• Paul Grewal slammed the judicial system for having inconsistent rules for crypto market participants.
• While demanding regulatory clarity, Grewal stated that liability should not depend on the court or judge assigned to the case.

Some Background to the Notice

Earlier this year in April 2024, Coinbase requested Judge Failla to pause the legal proceedings in the SEC lawsuit. The exchange demanded an interlocutory appeal citing “substantial grounds for differences of opinion” on whether the Howey Test shall be applicable to crypto transactions taking place in the secondary market.

Back then, Coinbase cited Judge Torres’s opinion in the Ripple vs. SEC lawsuit that XRP, when traded in the secondary market, does not satisfy the Howey Test. Coinbase said that such dueling opinions coming from different district judges make it difficult to know what the actual law is.

In responding to Coinbase’s request, the U.S. Securities and Exchange Commission said that “no court has followed Ripple” while applying the Howey Test to the secondary market sales.