
Coinbase asks the Second Circuit to rule that digital token trades aren't securities transactions, challenging SEC jurisdiction.
Coinbaseโs appeal could accelerate regulatory clarity, easing SEC pressure and shaping future US crypto rules.
As per a latest Bloomberg report, Coinbase Inc. asked the Second Circuit to say that digital token trades on its platform arenโt transactions governed under federal securities law.
โThere is no more pressing issue in securities law today than the scope of the Securities and Exchange Commissionโs authority to regulate secondary trades of digital assets,โ Coinbase said in its petition docketed in the US Court of Appeals for the Second Circuit. The appeals court could โclear away the cloud that currently hangs over the cryptocurrency market,โ it noted.
Second Circuit Ruling Could Accelerate Resolution
Notably, A decision by the Second Circuit stating that token trades aren’t securities transactions could speed up the end of the SEC’s case against Coinbase and ease US crypto regulations. The Trump administration has indicated that it will provide crypto companies with greater regulatory flexibility.
The case gives the appeals court a chance to weigh how it should apply the โHowey testโ to crypto transactions. Coinbase argued in its brief that trades on its platform are not investment contracts, but asset sales. The US District Court for the Southern District of New York granted Coinbaseโs request to seek an immediate appeal earlier this month in an SEC enforcement suit.
The US Chamber of Commerce and Blockchain Association have filed briefs supporting the Second Circuitโs review of the Coinbase case. They highlighted that the lack of clarity on whether crypto trades are investment contracts could have negative effects, as federal courts remain divided on the issue.
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The Need For Legal Clarity
The SEC sued Coinbase in 2023, accusing the platform of operating as an unregistered securities exchange. Coinbase argues that its crypto trades aren’t investment contracts and thus not under SEC jurisdiction.
Coinbase’s chief legal officer emphasized the need for legal clarity on this issue. Meanwhile, Trump’s SEC has created a “crypto task force” to develop a clear regulatory framework, and the US Court of Appeals has ordered the SEC to explain its refusal to provide crypto-specific rules.
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