Judge sends Howey question to higher court in Coinbase case 

This is a segment from the Forward Guidance newsletter. To read full editions, subscribe.

---

While some continue to hope that the upcoming Trump-era SEC will wave its magic wand and dismiss pending lawsuits against multiple crypto firms, Coinbase was just handed a win. 

The exchange, which the SEC sued in 2023, yesterday won its motion for an interlocutory appeal on whether crypto assets constitute investment contracts. The ruling is not an end to the case. But it will require the Second Circuit to consider this question, which, Coinbase argued, “could not be more pressing” in “numerous cases pending…across the country.” 

From Judge Katherine Polk Failla’s order to grant Coinbase’s interlocutory appeal motion: 

“At issue is more than how to apply Howey (about which, the Court agrees, there is an extensive body of case law); at issue is how to apply Howey to crypto asset transactions, in the context of the surrounding digital ecosystems. That is a difficult legal question of first impression for the Second Circuit — more than mere disagreement with the Court’s Order.” 

In other words, Failla thinks the legal question at hand — how and if crypto assets should be subject to securities laws — is too big to not consider at the appellate level. 

Failla has ordered a stay in proceedings until the interlocutory appeal is resolved, which could take months, if not longer. A ruling from the Second Circuit bears more weight than the District-level orders we’ve seen in recent months, many of which contradict one another. 

Coinbase’s expensive, time-consuming legal battle just may be exactly what the industry is looking for…assuming things go its way, of course.

---

Get the news in your inbox. Explore Blockworks newsletters:

• The Breakdown: Decoding crypto and the markets. Daily.
• 0xResearch: Alpha in your inbox. Think like an analyst.