Coinbase finds itself embroiled in a significant legal dispute with the US Securities and Exchange Commission (SEC) that has recently taken a fresh twist. Responding to the SEC's challenge against their request for an interlocutory appeal, Coinbase has reached a pivotal moment in this critical regulatory confrontation.

On April 12, Coinbase sought clarification from the US court on whether an investment agreement could be valid without subsequent obligations after the sale. This particular issue is deemed by the exchange as a crucial legal question in their ongoing disagreement with the SEC.

The SEC contended that the existing Howey Test in securities regulation has historically been adequate, therefore negating the necessity for certifying this appeal by the court. According to the SEC, no previous court has mandated post-sale obligations under this standard.

In a legal document dated May 24, Coinbase argued that the interlocutory appeal addresses a novel concern: the unexplored territory of whether a digital asset transaction lacking post-sale responsibilities can be classified as an "investment contract" under the Howey Test, a point not yet deliberated by any appellate court.

Highlighting the potential impact of their appeal on the SEC lawsuit, Coinbase emphasized that a favorable ruling could potentially dismiss nearly 70% of the SEC's accusations, as asserted by the exchange's legal representatives.

Furthermore, Coinbase underscored that the SEC's focus on the Howey Test for bitcoin transactions rather than their primary concern sidestepped a significant legal challenge. They suggested that an interlocutory review could circumvent a protracted discovery process and a trial centered on the token ecosystem.

Initially accused by the SEC on June 6, 2023, of operating as an unauthorized securities exchange, broker, and clearing agency, Coinbase, being the largest US-based exchange, faces the prospect of this lawsuit significantly influencing cryptocurrency regulations in the United States.

By bypassing the Howey test for securities, the SEC prompted Coinbase to lodge an interlocutory appeal, with the exchange asserting that FIT21 exposes what they perceive as the SEC's exceeding regulatory boundaries.