On April 12, Coinbase sought court permission for an interlocutory appeal in its legal battle with the SEC, questioning the definition of an “investment contract.” While Coinbase argues that such contracts require a contractual agreement, the SEC disagrees. Paul Grewal, Coinbase’s Chief Legal Officer, criticized the SEC for its overreach and impact on U.S. digital asset innovation.
The SEC had previously accused Coinbase of operating without proper registration as a securities exchange and broker-dealer. Coinbase refuted these claims, arguing that the transactions in question didn’t meet the criteria for “investment contracts” under the Howey test due to the absence of post-sale obligations.
Coinbase’s appeal challenges the classification of crypto transactions without post-sale obligations as “investment contracts” subject to SEC regulation. Grewal noted that Coinbase’s position aligns with prior SEC arguments, citing the Ripple case as a precedent with broader industry implications.
Recently, a court ruled partially in favor of Coinbase, stating that secondary crypto asset sales on its platform don’t violate the Securities Exchange Act. Nonetheless, the SEC remains aggressive towards crypto, planning to legally contest decentralized exchange Uniswap’s operations.
Ryan Sean Adams from Bankless criticized the SEC’s actions against Uniswap, viewing it as an attack on crypto and internet freedom. Previously, in March, the SEC had probed the Ethereum Foundation regarding Ethereum’s classification as a security.
SEC Chair Gary Gensler hinted that Ethereum’s shift to a proof-of-stake consensus might deem it an “investment contract,” but hasn’t provided a definitive stance on the matter.
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