One of the biggest Biden-era crypto enforcement actions may be on its way to resolution.
The SEC last week said its new crypto task force “may affect and could facilitate the potential resolution” of the agency’s lawsuit against crypto exchange Coinbase.
The lawsuit, first filed in 2023, was escalated to the Second Circuit last month with Coinbase’s successful motion for an interlocutory appeal.
Basically, the SDNY (the federal court that handled SBF’s trial and many other ongoing crypto matters) decided that a higher court needs to step in to resolve a key question: Do intermediated crypto transactions involve investment contracts (i.e., transactions made on an exchange)?
If the answer to this question is yes, then that means crypto exchanges are facilitating securities transactions, which would be a problem.
On the one hand, a ruling from the Second Circuit on this question would bring a lot more clarity to the space. One of the biggest issues with crypto regulation and enforcement today is that district court judges, sometimes even from the same district, are taking different stances.
An appeals court ruling would provide more concrete precedent for future cases. (The caveat here is the appeals process is long and expensive. And either party could keep appealing to higher courts should things not go their way.)
On the other hand, a definitive crypto policy stance from the SEC would be even better than legal precedent. “Better,” of course, is relative here. The agency could come up with something the industry opposes.
So lots of potential outcomes here. We’ll have to wait and see how it all shakes out.
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