The SEC’s appeal of the Ripple case strengthens Coinbase’s case, legal experts say.

By Crypto Gloom On Oct 6, 2024

Key Takeaways

The SEC’s appeal of the Ripple case demonstrates the ambiguity of the Howey test application, Coinbase’s legal team said.
Coinbase leverages the SEC’s legal position to seek clarity in digital asset classification.

The SEC’s appeal of the Ripple case only strengthens Coinbase’s position in its ongoing legal battle with the regulator, said James Murphy, a prominent cryptocurrency lawyer.

Coinbase’s legal team is urging a New York court to grant early approval of an interim appeal filed in April. They cite the SEC’s recent legal action in the Ripple case as evidence of the ambiguity of the Howey test and are trying to get the 2nd Circuit Court of Appeals to step in to resolve the issue.

Coinbase’s attorneys are currently involved in the ongoing SEC v. Coinbase Inc. and Coinbase Global lawsuits argue that a thorough review of the application of the Howey Test would provide much-needed clarity on the classification of digital asset transactions.

“By granting Coinbase’s motion to interlocutory appeal, this Court will help the Second Circuit provide a full explanation of the legal and practical implications of the SEC’s litigation position. A position the SEC acknowledged just weeks ago is “confusing,” Coinbase’s legal team wrote in an Oct. 4 letter first shared by FOX Business journalist Eleanor Terrett.

Interlocutory appeals are generally not granted before the final ruling. But Coinbase’s lawyers believe the SEC’s appeal of Ripple’s court ruling could strengthen their case, and Judge Catherine Falk Failla may reconsider the interim appeal.

On October 2, the SEC formally filed an appeal of Judge Torres’ August 7 ruling that fined Ripple $125 million for improper institutional sales of XRP tokens. In response, Ripple’s chief legal officer, Stuart Alderoty, said the team was considering a cross-appeal to challenge the SEC’s move.

According to Murphy, Judge Katherine Polk Failla’s delay in ruling on Coinbase’s original motion for interlocutory appeal was “surprising,” considering “these motions are typically decided very quickly.”

Last August, the SEC filed an interlocutory appeal to challenge Judge Analisa Torres’ summary ruling that certain XRP sales did not constitute securities under the Howey test. Less than two months after the move, Judge Torres denied the SEC’s request for an interlocutory appeal.