Coinbase, a prominent cryptocurrency exchange in the United States, has intensified its legal dispute with the US Securities and Exchange Commission (SEC) through a recent court filing.

On May 24, Coinbase submitted a memorandum supporting its interlocutory appeal, challenging the SEC's interpretation of the Howey test, a crucial framework used to determine if certain transactions meet the criteria of investment contracts.

Dispute Regarding Coinbase's Staking Program

The core of the disagreement revolves around Coinbase's staking program, which the SEC alleges constitutes an unregistered securities offering. This legal conflict dates back to March 27 when the court ruled in favor of the SEC's argument.

In response, Coinbase filed for an interlocutory appeal on April 12, contesting the court's ruling and seeking clarification on a key legal question: does the Howey test necessitate a post-sale contractual commitment to define an investment contract?

SEC's Attempt to Circumvent the Howey Test

Coinbase's memorandum argues that in the 78 years since the Howey decision, no appellate court has identified an investment contract without a post-sale contractual obligation. This leads Coinbase to assert that the issue is more about legal interpretation than the straightforward application of established law.

The company's legal team contends that the SEC is trying to bypass the Howey test, emphasizing the broader implications of this case for the cryptocurrency sector.

Highlighting SEC's Inconsistencies

Furthermore, Coinbase highlights inconsistencies in the SEC's approach, pointing out disparities between the regulator's arguments in this case and its stance in the ongoing lawsuit against Ripple.

The memorandum also references recent legislative actions, such as the House of Representatives passing a bill to restrict the SEC's authority over cryptocurrencies, underscoring the uncertainties surrounding the regulatory landscape for digital assets.

SEC vs. Coinbase Legal Battle

The SEC's lawsuit against Coinbase, initiated in June 2023, alleges multiple violations of securities laws. Apart from the staking program issue, the SEC asserts that 13 cryptocurrencies listed on Coinbase are securities. This case forms part of a broader regulatory crackdown on the cryptocurrency industry as the SEC aims to establish clearer guidelines for the classification and oversight of digital assets.

In response, Coinbase has taken proactive steps, not only in the courtroom but also in the public domain. Following the SEC's lawsuit, Coinbase launched the "Stand With Crypto" campaign, including a political action committee advocating for favorable cryptocurrency regulations.