On Tuesday, US crypto exchange Coinbase appealed to the Second Circuit Court of Appeals to deal with a key issue for the industry. The exchange seeks the court to find out whether secondary trades are outside the US Securities and Exchange Commission (SEC) scope.
Coinbase Seeks Clarity On Crypto Trades Classification
Coinbase has filed an appeal asking the US appeals court to rule out that crypto trades will not be securities. Within the January 21, 2025, filing, the crypto exchange contents that digital assets are “now a everlasting fixture of our economic system.”
As such, the industry, including the thousands and thousands of US users, crypto corporations, regulators, and lower courts, “badly need clarity on what federal securities laws require.”
Coinbase appeals to the Second Circuit Court of Appeals. Source: Bloomberg Law
The exchange considers there’s “no more pressing issue in securities law today than the scope of the Securities and Exchange Commission’s authority to manage secondary trades of digital assets.”
Coinbase considers the case “a perfect vehicle” for addressing this issue and providing clear rules for the multi-trillion-dollar industry, which it has lacked over the previous few years.
Without it, market participants face different rules before different courts, and neither the Commission nor Congress can make sure who’s chargeable for the regulation of digital-asset trading.
Within the filing, the crypto exchange argues that the trades on its platform will not be “securities transactions but asset sales” of digital assets as an alternative of physical ones.
“The parties are anonymous to one another, make no exchange or promise apart from the sale of the digital asset itself, and thus haven’t any obligation or continuing commitment to one another past the purpose of sale,” it added, noting that, unlike bonds or stocks, buyers don’t obtain any rights against the asset issuer.
Regulatory Clarity Stays A Key Issue
Coinbase’s appeal comes after Latest York Federal Judge Katherine Failla granted a “rare” interlocutory appeal on January 7, which allowed the exchange to contest the SEC’s claims on the Second Circuit Court of Appeals.
As reported by Bitcoinist, Judge Failla considers the “conflicting decisions” on essential crypto cases, like Terraform Labs and Ripple, to require the Second Circuit’s guidance, emphasizing the necessity for clarity on how the Howey test applied to crypto assets.
The SEC sued Coinbase in 2023, alleging that the exchange was an unregistered securities exchange. The US regulator argued that Coinbase operated as an unregistered broker-dealer and was illegally selling unregistered securities through its staking program.
Nonetheless, the Commission is anticipated to start out a latest era under the recently installed crypto-friendly Trump administration. Mark Uyeda, acting chairman of the SEC, recently announced that Commissioner Hester Peirce will lead a dedicated Digital Assets Task Force.
The initiative goals to determine a transparent regulatory framework and realistic pathways for the industry after years of uncertainty and “regulation by enforcement.”
Recent reports also revealed that the Republican Commissioners are allegedly considering “measures to make clear the factors under which digital assets are classified as securities” and reviewing various ongoing “crypto enforcement cases.”
Total crypto market capitalization is at $3.49 trillion within the one-week chart. Source: TOTAL on TradingView
Featured Image from Unsplash.com, Chart from TradingView.com