Judge halts SEC lawsuit against Coinbase amid ‘conflicting’ crypto laws

A federal judge oversees the SEC charge In Coinbase's ruling on Tuesday, the case was put on hold pending an appeals court decision. US District Judge Catherine Failla agreed with Coinbase's argument that many courts around the country are reaching different conclusions about the legality of crypto, which should be recognized as such. A new legal issue.

of Buyer No doubt for the SEC, which for years under the Biden administration has argued that the sale of many crypto assets is illegal under existing securities laws.

In today's ruling, Judge Failla effectively rejected that position, making the question of how securities laws apply to crypto a “prima facie case” that has never before been decided and one that courts must weigh for the first time.

Because the legality of crypto is such a novel and complicated legal issue, Failla writes, it's understandable why courts across the country are reaching different conclusions about the technology — a state of affairs that shouldn't continue.

“There is conflicting authority with respect to Hawaii's application,” the judge wrote, referring to the so-called Hawai'i test, which has long been used by the SEC and federal courts to determine an asset's status as a security. “Howie App The Second Circuit's initial understanding of crypto-assets raises a difficult issue.

In short, the Hawaiian testA 1946 Supreme Court case—says an asset must check four boxes to qualify as an “investment contract” type of security. It basically boils down to investing money (buying property) in a joint venture (like a company) with the expectation that you will get a return on that investment without putting in any effort. Stocks fit right into that category. Judge Filea thinks the case isn't settled when it comes to crypto tokens—so it's going to the Second Circuit.

The Second Circuit Court of Appeals, one of thirteen federal appeals courts in the United States, will decide whether to hear the SEC's case against Coinbase on an interlocutory appeal. If he hears the case, a judge on that powerful circuit will decide whether it should continue in Judge Fayla's court or be dismissed based on the underlying issues.

In order to grant Coinbase's interlocutory appeal, Judge Failla had to find that an immediate appeal would materially increase the likelihood that the case would be dismissed midway through the proceedings. She wrote that today's filing of Interlocutor's appeal “may result in the dismissal of most of the SEC's claims against Coinbase.”

Naturally, the crypto legal community expressed great interest in this afternoon's decision, with some experts speculating that it could have far-reaching implications.

“Today's ruling in SEC v. Coinbase is a watershed moment in the law related to digital assets,” Amanda Tuminelli, chief legal officer of the crypto lobbying group DeFi Education Fund, said in a joint statement. Decrypt.

“For the first time, a federal district court will have the opportunity to address the legal question of the SEC's regulatory authority over digital assets,” she continued. “If the Second Circuit agrees to hear Coinbase's appeal, it will have the opportunity to provide the legal clarity the industry has been asking for.”

Bill Hughes, senior consultant at the Ethereum software giant Consensys, argued that Judge Failla's decision in the case of Coinbase should be applied quickly to the same, pending crypto throughout the country.

“This case will largely determine the outcome of every enforcement case brought by the SEC,” he said. Post By X (formerly Twitter).

The SEC did not immediately respond DecryptA request for comment regarding his response to today's verdict

The potential shakeup in the SEC's crypto policy comes just weeks before Donald Trump prepares to retake the White House and clean house on President Joe Biden. Crypto-hatred Management. Trump's choice of former SEC Commissioner Paul Atkins to be the next chairman of the agency was widely seen. Very pro-crypto movement It was supported by industry leaders.

How the pro-crypto SEC and DOJ under the Trump administration will choose pending federal lawsuits Several US crypto organizations It remains an open question for now.