As stated by Coinbase, "First, the SEC avoids the “controlling question” inquiry by asserting it cannot tell what question Coinbase would have the Second Circuit consider—even though Coinbase stated it 10 times in its application."
Coinbase has intensified its legal battle against the US Securities and Exchange Commission (SEC), asserting that the regulatory body is attempting to bypass the established Howey test.
Earlier in 2023, the SEC initiated legal action against Coinbase, accusing the exchange of violating securities laws. Besides questioning the staking program, the SEC claimed that 13 of the cryptocurrencies listed on Coinbase were securities. After a year of legal tussle, Coinbase filed an interlocutory appeal to contest a March 27 decision, where the SEC claimed the cryptocurrency exchange’s staking program constituted an unregistered securities offering.
In its latest filing, the exchange discussed whether an investment contract necessitates a contractual undertaking. The SEC, in its memorandum opposing Coinbase's appeal, argued that no court had ever required a post-sale contractual undertaking for applying the Howey test. Coinbase countered this point in its May 24 filing, emphasizing that no appellate court in the 78 years since the Supreme Court established the Howey test has identified an investment contract without a post-sale contractual obligation. Coinbase asserts this issue requires judicial resolution rather than being seen as an inevitable application of established law.
Coinbase further highlighted inconsistencies between the SEC’s claims in its case against Ripple (XRP) and those against Coinbase. The memorandum also noted that the House of Representatives recently passed a bill that would limit the SEC's expansive jurisdiction.
