Court Ruling on Coinbase Sparks Debate Over Ripple vs. SEC Case

• The third Circuit court ruled the SEC must justify its denial of Coinbase’s rulemaking petition.
• Judge Bibas highlighted outdated securities laws as ill-suited for modern digital assets.
• Ripple’s case outcome may be influenced by the Third Circuit’s reasoning on SEC’s approach.

The United States Court of Appeals for the Third Circuit recently ruled partially in favor of Coinbase in its rulemaking petition lawsuit against the U.S. Securities and Exchange Commission (SEC). This decision has reignited debates over the SEC’s actions in crypto-related lawsuits, with lawyers examining its implications for the ongoing Ripple vs. SEC case.

The appellate court determined that the SEC’s denial of Coinbase’s rulemaking petition lacked sufficient justification. Judges instructed the regulator to clearly explain its reasoning and provide specific rules for identifying digital assets as securities. Legal experts argue this ruling underscores the need for updated regulatory frameworks, as century-old securities laws are poorly suited to modern digital assets.

Attorney James Murphy, known as MetaLawMan, emphasized the importance of legislative clarity before any crypto rulemaking. He urged the SEC to delay regulatory actions until Congress passes a market structure bill to distinguish between digital asset commodities and securities. Meanwhile, attorney Fred Rispoli commended Judge Bibas’ concurrence, which highlighted the disconnect between outdated regulations and emerging blockchain technology.

Rispoli also suggested that if similar reasoning is adopted by the Second Circuit Court of Appeals in the Ripple case, the SEC’s position on crypto could face significant setbacks.

Former SEC lawyer James Farrell noted that the Third Circuit ruling required the SEC to justify its regulatory approach. He highlighted that while the ruling supports crypto innovation, it also cautions against schemes designed to evade securities laws. This dual perspective leaves room for interpretation in future cases.

The SEC is scheduled to file its principal brief in the Ripple lawsuit by January 15. Lawyers, including Jeremy Hogan, anticipate that the outcome could be influenced by the Third Circuit’s reasoning. With pro-crypto figures like Paul Atkins involved in regulatory discussions, the SEC may choose to reevaluate its approach to the appeal.