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Coinbase Granted Significant Advance in Court Clash With Gensler’s SEC
Coinbase Inc. has been given an unusual chance to skip ahead in a U.S. federal court dispute with the Securities and Exchange Commission (SEC) when a judge granted the company’s request to chase a narrow appeal of the regulator’s accusations about trading crypto securities.
If the U.S. digital assets exchange can get the U.S. Court of Appeals for the Second Circuit to take its appeal and agree that the SEC was wrong about its accusations that Coinbase improperly handled the trading of unregistered securities, such a decision would echo throughout the wider crypto industry.
Judge Katherine Polk Failla of the U.S. District Court for the Southern District of New York decided on Tuesday to approve a request from Coinbase to ask the higher court to consider one core question in the dispute, in a process known as an interlocutory appeal. And while Coinbase is chasing that matter, the rest of the case will sit idle.
Failla noted she doesn’t appreciate the company’s «efforts to cast aspersions on the SEC’s approach to crypto-assets,» but she pointed out the clash in rulings from different federal courts on similar questions and decided that «conflicting decisions on an important legal issue necessitate the Second Circuit’s guidance.»
At the heart of the legal clash between the U.S. securities regulator and the leading U.S. crypto exchange is whether certain tokens traded on the platform should be considered securities, and thus be seen as breaching the law.
Coinbase has argued, among other points, that the issuers of crypto tokens traded on its secondary market don’t owe anything to the buyers, so the tokens don’t tick the boxes of the legal standard for what makes a security, the so-called Howey test.
The judge said she’s granting the April 2024 request «because it presents a controlling question of law regarding the reach and application of Howey to crypto-assets, about which there is substantial ground for difference of opinion, and the resolution of which would advance the ultimate termination of the SEC’s enforcement action.»
«We appreciate the court’s careful consideration,» Coinbase Chief Legal Officer Paul Grewal posted on social-media site X. «On to the Second Circuit we go.»
Read More: Coinbase Slugs It Out With U.S. SEC in Effort to Get Key Crypto Question Answered
A spokesperson for the SEC – still run by crypto skeptic Gary Gensler until he steps down as chairman when President-elect Donald Trump is sworn in on January 20 – declined to comment on the latest ruling.
In the end, this and other court disputes over what constitutes a crypto security could head toward the Supreme Court but finally run into irrelevance if Congress passes a new law to define how the assets and their trading should be regulated in the U.S. That’s what the industry is aiming for with its political operations and lobbying efforts, focusing on steering this year’s new Congress toward more industry-friendly legislation.
The SEC’s leadership is also about to change hands to Republican control, which is likely to mean more openness to the crypto industry. A new agency chair could change the course of its enforcement actions, including this court case.
Shares of Nasdaq-listed cryptocurrency exchange Coinbase (COIN) rose 43% this month, making the firm the top performer in the S&P 500 since it joined the index at the end of last month.
June’s run is already the stock’s best since November and caps three straight monthly gains. Coinbase’s shares reached their highest level since their public debut.
COIN hit a $382 high this week before enduring a slight correction, ending the week at $353 and seeing a slight 0.7% drop in after-hours trading to $351.
The wider S&P 500 index rose roughly 5% in June as geopolitical tensions eased.
Washington’s progress on the GENIUS Act, Congress’s first rulebook for dollar-pegged stablecoins, helped shift investor focus from trading fees to stablecoin revenue.
The bill brightened the outlook for Circle, whose shares hit a record high and saw its market cap near that of Coinbase this week.
Coinbase keeps all yield on USDC balances held on its platform and nearly half of other USDC income, equal to about 99 percent of Circle’s revenue, giving shareholders indirect exposure at no added cost, CNBC reported Friday, citing analysts including Citizens’ head of financial technology research Devin Ryan.
Trading, however, remains subdued. Average daily volume on Coinbase has drifted lower since April.
Robinhood (HOOD) has introduced micro futures on bitcoin (BTC), solana (SOL) and XRP in the United States., expanding its existing crypto futures offering for its nearly 26 million funded accounts.
Micro contracts need far less collateral than full-size futures, letting traders take directional positions while committing a smaller slice of capital.
The contracts offer traders more flexibility to bet on a cryptocurrency’s future price direction or hedge current positions given their smaller size.
The launch rounds out a futures suite that began with BTC and ETH in January. It also comes weeks after the firm closed its $200 million purchase of Bitstamp and finalized a $179 million deal for Canada’s WonderFi.
Robinhood’s data shows that crypto notional volumes have exploded upward over time, reaching $11.7 billion in May. The figure marks a 36% rise month-over-month, and a 65% growth year-over-year.
XRP climbed 5.5% to $2.19 in the last 24 hours after a trio of catalysts converged to help the cryptocurrency outperform the wider cryptocurrency market.
One of the catalysts was launch of XRP micro futures on Robinhood. The contracts offer traders more flexibility to bet on the cryptocurrency’s future price direction or hedge current positions given their smaller size.
Regulatory fog also thinned. On Friday, Ripple withdrew its cross-appeal in its long-running U.S. Securities and Exchange Commission (SEC) lawsuit. The SEC sued Ripple back in 2020 over its XRP sales, alleging these violated securities laws. The SEC is expected to drop its own appeal, leaving last year’s ruling, ordering Ripple to pay a $125 million civil penalty to the SEC, intact. The move could lift a lid that had kept some investors on the sidelines.
On-chain data rounded out the bullish setup. The XRP Ledger logged over a 1.1 million active addresses over the past week according to crypto analyst Ali Martinez, who cited Glassnode data.
XRP’s rise saw it outperform the wider crypto market, with the broader CoinDesk 20 (CD20) index rising 1.7% in the last 24 hours.
Coinbase Outpaces S&P 500 With 43% June Rise as Stablecoin Narrative Grows: CNBC
Robinhood Launches Micro Bitcoin, Solana and XRP Futures Contracts
Why is XRP Up Today? Trio of Catalysts Sees Token Outperform Wider Crypto Market
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