Coinbase is seeking an interlocutory appeal in its ongoing court case with the US Securities and Exchange Commission (SEC). This petition marks the latest development in a highly-monitored lawsuit stretching as far back as June 2023. In a motion submitted on April 12, the American exchange is aiming for a constitutional clarification of a specific “controlling question of law” as it battles the Commission’s allegations of operating as an “unregistered securities exchange, broker and clearing agency.”

In general, Coinbase appears to be deploying another strategy in undermining the SEC’s petition after the court denied the exchange’s motion to dismiss the charges in question. Coinbase, which ranks as America’s largest crypto exchange with 73 million users, has remained vocal on the need for a clear crypto regulatory framework while heavily criticizing the SEC’s continuous crackdown on the digital asset industry.

Normally,  legal appeals are heard after a trial or a final decision by a lower court, but in the case of interlocutory appeals, certain issues or rulings are appealed before the conclusion of the entire case. In SEC v. Coinbase, the defendants are seeking a review of the meaning of an investment contract in terms of crypto transactions.

Coinbase has stated that this petition checks all legal requirements for an interlocutory appeal. Firstly, the exchange claims there is a “controlling question of law,” which states if an investment contract can be formed based on transactions with no post-sale obligations. 

Furthermore, Coinbase highlights aspects of “substantial ground for difference in opinion” in regard to this question, especially about the application of the Howey Test to cryptocurrency transactions. Finally, the American exchange states the review of this question could potentially neutralize SEC’s principal allegations in the court case between both parties, thus the need for this appeal.

Thereafter, the court shall now review this petition for an interlocutory appeal and, upon certification, shall submit the controlling question of law to an appeal court for the appropriate resolution or guidance.

Commenting on Coinbase’s latest petition, the exchange’s chief legal officer, Paul Grewal, has stated that the motion for an interlocutory appeal is important for the crypto industry, especially amidst the SEC’s “unjust” enforcement actions due to the lack of a legal regulatory framework. 

Grewal said:

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

The crypto lawyer also stated his confidence in the sustainability and growth of digital assets while also reiterating Coinbase’s commitment to clear operating rules and regulations for the US crypto industry.

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