U.S. regulators said the appeals court should not heed Coinbase's request to consider how or whether traditional securities rules apply to virtual currencies.
Coinbase, the largest U.S. cryptocurrency exchange, has applied for permission from the Second Circuit Court of Appeals to ask whether the Howie test, which the Supreme Court has long used to evaluate securities, should apply to digital assets. Coinbase hopes that doesn't happen.
The U.S. Securities and Exchange Commission said Friday that Coinbase has failed to argue that this is necessary.
This question lies at the heart of the SEC's accusation that Coinbase operates as an unregistered broker, exchange, and clearing house in the U.S. If some cryptocurrencies are securities, then the Howie test , meaning Coinbase needed to get SEC approval before allowing customers to trade cryptocurrencies, the regulator said.
The SEC claimed in a filing that Coinbase is creating a “new legal test” for how cryptocurrencies fit into existing securities precedent that a district court judge has already rejected. .
“Coinbase remains unable to advance a single, consistent version of this theory, and currently argues that this theory presents critical problems,” the filing states. ing. “This is not surprising. In 80 years, we have never required a post-sale 'contractual promise' or anything beyond the three elements explicitly enumerated by the Supreme Court in Howie.” Ta.”
The application further argued that Coinbase failed to successfully argue that there was a “controlling question” in the application.
The SEC also said that while Coinbase's appeal focuses on specific legal issues related to “contractual obligations,” the actual discussion of Howie's application to cryptocurrencies is an entirely different matter. insisted.
“Similarly, in an attempt to satisfy the element of “precedential value for a large number of instances,'' Coinbase once again pivoted away from the question of “contractual obligation,'' this time “[h]“Howi applies to secondary market cryptocurrency transactions,” the filing states.
Judge Catherine Polk Failla, who is overseeing the SEC's case against Coinbase, must rule on the interlocutory appeal motion. If she sides with Coinbase, the exchange could send the complaint to the actual appellate court.
