Coinbase is trying to get a higher court to take a look at a question at the heart of its legal dispute with the Securities and Exchange Commission.
The courts must accept the request for appeal before it can move forward, but the SEC has said the exchange hasn't made its case.

Coinbase Inc. (COIN) took another step in its back-and-forth argument with the U.S. Securities and Exchange Commission (SEC) on whether the cryptocurrency exchange should be allowed to raise a single, core legal point for consideration by a higher court.

After the company's effort to dismiss the SEC's enforcement case against it was rejected in federal court, Coinbase lawyers on Friday filed for a so-called interlocutory appeal that seeks to get one question considered at the next level up: Is a digital asset transaction that poses no obligation to the original issuer of the asset an investment contract regulated by the SEC?

Coinbase's filing described the query as "a novel legal question in a regulatory action against a market leader that could shape or distort a multi-trillion-dollar industry."

The exchange said "no appellate court has addressed whether a digital asset transaction carrying no post-sale obligations can be an 'investment contract'" under the Howey Test that's the legal standard for determining what assets are securities. Coinbase also argued that the SEC is acting inconsistently, because it pursued a similar appeal in its case against Ripple.

Coinbase had requested this appeal to the U.S. Court of Appeals for the Second Circuit last month, and the SEC argued on May 10 that the court already "noted the lack of any legal authority for Coinbase’s various arguments," contending that "there can be no doubt" that the latest request to be allowed to appeal also fails to establish such legal grounds and should be halted.

The request would have to be accepted by the courts, including Judge Katherine Polk Failla, of the U.S. District Court for the Southern District of New York, who rejected Coinbase's request to dismiss the SEC's original case, which accused the exchange of operating illegally. Resolving this central legal question could help steer a number of other SEC enforcement clashes with the industry.

Also this week, Coinbase lost a U.S. Supreme Court argument over a narrow question on arbitration disputes.

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Jesse Hamilton

Jesse Hamilton is CoinDesk's deputy managing editor on the Global Policy and Regulation team, based in Washington, D.C. Before joining CoinDesk in 2022, he worked for more than a decade covering Wall Street regulation at Bloomberg News and Businessweek, writing about the early whisperings among federal agencies trying to decide what to do about crypto. He’s won several national honors in his reporting career, including from his time as a war correspondent in Iraq and as a police reporter for newspapers. Jesse is a graduate of Western Washington University, where he studied journalism and history. He has no crypto holdings.