Cryptocurrency exchange Coinbase has requested the United States District Court to scrutinize a specific “controlling question” raised by the U.S. Securities and Exchange Commission (SEC) in its ongoing lawsuit against the exchange.
“The question presented here is unencumbered by factual disputes and therefore ripe for immediate review,” Coinbase argued in an April 12 filing with the U.S. District Court for the Southern District of New York.
Coinbase chief legal officer Paul Grewal explained in an April 12 post on X that the "controlling question" revolves around whether an investment contract requires "something contractual."
“Whether an “investment contract” can exist absent any post-sale obligation is a pure, controlling question of law,” it claims in the court filing.
Grewal elaborated that while Coinbase holds the view that an investment contract requires contractual obligations after the sale, the SEC argues that it doesn't.
This comes after U.S. District Judge Katherine Failla denied Coinbase’s motion to dismiss the SEC’s case against the exchange alleging that the exchange operates as an unregistered exchange, broker, and clearing agency.
However, if the court decides to approve the interlocutory appeal, it could potentially significantly influence the ongoing case, which has been going on since June 2023.
This is because the SEC asserted that Coinbase crypto transactions were investment contracts "despite an absence of any alleged contractual undertakings," according to Coinbase.
Reversal on the question presented would dispose of the SEC’s principal claims, which account for the bulk of the complaint’s factual allegations.
It further claims that a question of law is controlling if its resolution could “significantly affect the conduct of the action.”
Related: Coinbase cleared in lawsuit over crypto transactions
Grewal highlighted the early filing of their appeal request — which was submitted just 17 days after the motion to dismiss was denied.
However, he justified the action due to its significance for the wider crypto industry, with the aim of resolving the dispute over crypto transactions as soon as possible.
“We’re asking to take this up on appeal earlier than normal because it's critical to our industry. The SEC’s action against us and other digital asset companies goes way beyond the legal authority granted by Congress and puts an unjust cloud over US digital asset innovation.”
This comes after Coinbase achieved a major victory in a civil lawsuit, against plaintiffs claiming that the exchange offered and sold them unregistered securities.
On April 6, Cointelegraph reported that the United States Court of Appeals for the Second Circuit ruled in favor of Coinbase, confirming that secondary sales of cryptocurrencies on its platform do not violate the Securities Exchange Act.
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