Deniz 
Coinbase asked an appeals court to look into whether or not traditional securities laws apply to cryptocurrency, but US regulators claimed the court shouldn’t do that.
The biggest U.S. cryptocurrency exchange, Coinbase, recently asked the Second Circuit Court of Appeals to decide whether digital assets should be subject to the Howey Test, a historically applicable evaluation for securities established by the Supreme Court.
All digital assets should be subject to the same standards set by the Supreme Court for securities. Ideally, Coinbase would like it not to.
The US Securities and Exchange Commission (SEC) stated on Friday that Coinbase has failed to adequately demonstrate the necessity of this.
The US Securities and Exchange Commission has accused Coinbase of acting as an unlicensed broker, exchange, and clearinghouse, and the central question is whether or not this is true. According to authorities, Coinbase should have obtained the SEC’s approval before allowing consumers to trade some cryptocurrencies if they qualify as securities and pass the Howey Test.
A district court judge had already rejected firm’s attempt to establish a “new legal test” for the potential integration of cryptocurrency into preexisting securities precedent, according to the SEC’s complaint.
“Coinbase remains unable to advance a single, coherent version of this theory, which it now claims presents a controlling question,” according to the lawsuit. “This is unsurprising—in eighty years, ‘no court’ has ever required post-sale ‘contractual undertakings’ or anything beyond the three factors expressly enumerated by the Supreme Court in Howey.”
The document continued by claiming that Coinbase had failed to establish a “controlling question” in its submission.
While Coinbase claims in its appeal to be addressing a particular legal issue pertaining to “contractual obligations,” the SEC maintained that the company was really arguing about a completely separate matter—the application of Howey to cryptocurrency.
“Similarly, attempting to meet the ‘precedential value for a number of cases’ factor, Coinbase again pivots away from the ‘contractual obligations’ question, this time into ‘[h]ow Howey applies to secondary-market crypto transactions,'” according to the document.
The SEC’s action against Coinbase is being presided over by Judge Katherine Polk Failla, who must decide the application for interlocutory appeal. Coinbase will be able to take the matter to the real appeals court if she rules in favor of the exchange.