Federal judge supervising the Securities and Exchange Commission lawsuit It ruled against Coinbase on Tuesday that the case should be temporarily halted until an appeals court can consider the matter. U.S. District Judge Katherine Failla agreed with Coinbase's argument that too many courts across the country have reached different conclusions about the legality of cryptocurrencies, which should be recognized as a new legal issue.

the to rule This is undoubtedly a blow to the Securities and Exchange Commission, which has argued for years under the Biden administration that selling most crypto assets is clearly illegal under existing securities laws.

In her decision today, Judge Failla directly rejected that position, finding that the question of how securities laws apply to cryptocurrencies is a “question of first impression,” meaning it has not been decided before and must be considered by courts for the first time.

Since the legality of cryptocurrencies is a new and complex legal matter, Failla wrote, it is understandable why courts across the country are reaching different conclusions about the technology — a situation that should not continue.

“Conflicting authority exists regarding the application of Howey to cryptoassets,” the judge wrote, referring to the so-called Howey test, which the SEC and federal courts have long used to determine an asset’s status as a security. “Amateur application to cryptoassets raises a difficult issue of first impression for the Second Circuit.”

In short, amateur testing- Established in A Supreme Court case In 1946 - stipulates that an asset must check four boxes to qualify as an “investment contract,” a type of security. It basically boils down to investing money (purchasing assets) in a corporate enterprise (such as a company) with the expectation that you will make a return on that investment without any effort on your part. Stocks fit neatly into this category. He rules over Clearly, Failla believes that the matter is not settled when it comes to crypto tokens, and so it is with the Second Circuit.

The Second Circuit Court of Appeals, one of thirteen federal appeals courts in the United States, will now decide whether to agree to hear the SEC's case against Coinbase on interlocutory appeal. If the case is heard, the judge in that powerful district will determine whether it should proceed in Judge Failla's courtroom, or be dismissed based on the underlying issues.

In order to grant Coinbase's request for interlocutory appeal, Judge Failla had to find that an immediate appeal of the case in the middle of its proceedings would materially increase the likelihood of its dismissal. It did so, writing that granting today's interlocutory appeal "could result in the bulk of the SEC's claims against Coinbase being dismissed."

Naturally, the cryptocurrency legal community expressed great excitement about the ruling this afternoon, with some experts predicting that it could have far-reaching implications.

“Today’s ruling in SEC v. Coinbase represents a potentially pivotal moment in the law surrounding digital assets,” Amanda Tominelli, chief legal officer at cryptocurrency lobby group DeFi Education Fund, said in a joint statement with the SEC. Decryption.

She continued: “For the first time, the Federal Circuit Court will have the opportunity to address the overriding legal question of the extent of the SEC’s legal authority over digital assets.” “If the Second Circuit agrees to hear Coinbase’s appeal, it will have the opportunity to provide the legal clarity the industry demands.”

Bill Hughes, senior counsel at Ethereum software giant Consensys, said Judge Failla's ruling today in the Coinbase case should quickly be applied to similar, pending lawsuits related to cryptocurrencies across the country.

“Every enforcement case brought by the SEC where this issue will largely determine the outcome should stand,” he said in a statement. mail On X (formerly Twitter).

The Securities and Exchange Commission did not immediately respond DecryptionRequested comment regarding her reaction to today's ruling.

The potential amendment to the SEC's cryptocurrency policy comes just weeks before Donald Trump reclaims the White House and cleans out the White House under President Joe Biden. Anti-crypto administration. Trump's selection of former SEC Commissioner Paul Atkins as the agency's next head was widely seen as a move A very pro-encryption move Which was supported by industry leaders.

How the pro-crypto Securities and Exchange Commission and the Justice Department under the Trump administration will choose to navigate the federal lawsuits pending against it Many American crypto companies It remains, for now, an open question.