Coinbase is challenging the Securities and Exchange Commission (SEC) over its regulatory authority. The exchange has filed for an interlocutory appeal in federal court, which is a request for a higher court to review a specific legal point before a case is resolved in its entirety.

Coinbase's move comes after a federal judge denied its motion to dismiss the SEC's case against the company. The crux of the appeal is whether secondary trades of digital assets, where there is no obligation to the original issuer, should be considered investment contracts under the SEC's jurisdiction. Investment contracts are securities regulated by the SEC and must be properly registered under the law.

The SEC maintains that most digital assets are securities, while Coinbase and others in the industry argue that once an asset is traded on secondary markets and is detached from the issuer, it falls outside the SEC's legal reach. Coinbase's appeal seeks clarity on the application of the Howey test to digital asset transactions, which determines what constitutes a security. The company stated, "The application of Howey to digital asset transactions raises hard questions."

The request for an interlocutory appeal was filed on Friday and would need acceptance from both Judge Katherine Polk Failla of the U.S. District Court for the Southern District of New York and the U.S. Court of Appeals for the Second Circuit to proceed. If granted, it could potentially lead to a U.S. Supreme Court decision that definitively resolves the scope of the SEC's regulatory power over digital assets.

Judge Failla ruled last month that the SEC had sufficiently demonstrated its legal premise in its accusations against Coinbase for the case to proceed. While the appeal on this specific legal point is considered, the rest of the case would continue toward trial in her court.

An SEC spokesman, when asked for comment on the appeal attempt, indicated that any response would come through public filings to the court.

Appeal Filing

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