The appeal attempt pits Coinbase and the SEC over investment definitions.

Coinbase relied heavily on case law in its recent lawsuit against the U.S. Securities and Exchange Commission (SEC), reaching the rare conclusion that “the SEC seeks to avoid the (Howey) test.”

Coinbase filed a memorandum on May 24 in support of an interlocutory appeal (an appeal of a single ruling in an ongoing case). This document is a response to the SEC’s objection to the original request for such an appeal. Coinbase filed an interim appeal on April 12 of the SEC’s March 27 ruling that it had established sufficient grounds to claim that the cryptocurrency exchange’s staking program was an unregistered securities offering.

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Coinbase argued that the governing question in the SEC’s lawsuit – a fundamentally important issue and a necessary element of the interlocutory appeal – was whether contractual commitments were required in the investment agreement. In its original memorandum opposing Coinbase’s interlocutory appeal, the SEC argued that no court had required a post-sale agreement to apply Howey. In a filing dated May 24, Coinbase countered:

“The SEC ignores the fact that there has been no appellate court in the 78 years since Howey (Test) found an investment agreement without a post-sale agreement.”

This, in turn, ripens the issue for a court decision rather than an “inevitable application of settled law,” Coinbase said. It also found that the SEC’s claims in its lawsuit against Ripple were inconsistent with those in the Coinbase case, and noted that just days ago the House of Representatives passed legislation “denying the SEC’s claimed expansive jurisdiction.”

The SEC filed suit against Coinbase in June 2023, accusing it of violating securities laws. In addition to the claims about the staking program, the SEC also stated that 13 of the listed cryptocurrencies are securities.

Coinbase has been quite active in defending itself and the cryptocurrency industry. In June, days after the SEC filed its lawsuit, it launched the Stand with Crypto campaign, which now includes a political action committee.

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