Coinbase Global Inc. (COIN) is set to make its final case on Tuesday that a judge should spring it from the clutches of the U.S. Securities and Exchange Commission (SEC) in its unregistered-securities dispute.

In Coinbase’s last word on its motion to get the accusations tossed before trial, a person familiar with the plan said the company will double down on familiar arguments: The SEC hasn’t demonstrated the transactions were investments contracts (and thus, securities), because it hasn’t shown any actual contracts existed, and the SEC is violating the “major questions doctrine” that basically holds that federal agencies have no business regulating novel areas that are awaiting congressional action.

After Coinbase’s Tuesday filing deadline, Judge Katherine Polk Failla of the U.S. District Court for the Southern District of New York will have the full arguments from both sides. The judge – who has signaled some skepticism of SEC arguments – will weigh whether Coinbase is irrefutably correct or that there’s merit in the SEC’s contention that the idea of an investment contract is broader than a traditional, signed agreement. If she’s strongly moved by Coinbase’s legal argument, she can dismiss the case, though getting a government enforcement action thrown out at this stage is usually a longshot.

The agency had originally targeted Coinbase with an enforcement action in June, and it represents one of the clearest confrontations between the U.S. securities regulator and the crypto industry, represented by a publicly listed U.S. company that’s one of the biggest digital assets exchanges. The case’s outcome could change the course of the industry in the U.S.

“This is an extremely important case for, not just the cryptocurrency industry, but for the future of digital assets in America,” said Jason Gottlieb, a lawyer who works with crypto clients at Morrison Cohen in New York.

Howey test

Coinbase’s motion to get an early judgment argued that the SEC is well out of bounds, but the agency responded that the so-called Howey test that legally determines whether something is a security is very flexible and is meant to be widely interpreted. If investors expected profit from a project, that’s a central factor, agency officials including Chair Gary Gensler have said.

“To distract from the fatal flaws in its legal arguments, Coinbase cries foul and seeks to blame the SEC for its current legal predicament,” SEC lawyers said in their response to Coinbase earlier this month.

But Coinbase has argued – and some judges seemed to agree – that tokens aren’t inherently securities themselves and that they have to be attached to an investment contract to be defined that way.

“The SEC’s brief was more of the same,” said Paul Grewal, Coinbase’s chief legal officer, in a statement to CoinDesk. “We look forward to laying out the facts in our final response brief.”

The SEC has suffered a series of court setbacks that have demonstrated the federal judges in its multi-front battle against the crypto industry aren’t rushing to show the agency deference. The SEC’s foundation that virtually all cryptocurrencies are securities and that unregistered companies trafficking in them are breaking securities law has developed significant cracks, most notably in the Ripple ruling that said that company didn’t violate the law in selling its affiliated XRP cryptocurrency to retail customers.

Major questions

Where the SEC may have some momentum is in Coinbase’s other assertion, that the “major questions doctrine” – the same legal theory that cost the Biden administration a recent loss in the dispute over canceling student loan debt – should keep the SEC from regulating in a space that Congress is writing legislation about. A recent decision from Judge Jed Rakoff in the Terraform Labs case, he argued that the SEC’s regulation of crypto doesn’t rise to the “extraordinary cases” that the doctrine is meant for. So the agency knows at least one judge in the same court has leaned toward its view.

However, Rakoff was addressing a specific argument in a specific case, and he looked at the industry through the frame of the $1 trillion value of all the industry’s tokens.

“The treatment of digital assets and the sale of digital assets is absolutely a major question,” Gottlieb said. “It’s much larger than a trillion-dollar question. It’s quite literally the future of the global economy.”

Judge Failla will respond in the coming weeks and could ask the parties to come to court and make these same arguments in-person. It could be 2024 before she makes her decision on this motion, but declining Coinbase’s request doesn’t necessarily represent a big win for the SEC. The case would then keep going into its next stages in which Coinbase would continue to make its arguments in advance of a potential trial.

And this isn’t the only battle the SEC and Coinbase are waging in court. The company had also sued the SEC in April, demanding answers to its petition asking the agency whether it would issue rules for crypto. That case may be approaching some conclusion, because the SEC told that court that the agency’s staff made a recommendation on Oct. 10 to the five-member commission on how to proceed with Coinbase’s petition.

Read More: Coinbase Asks U.S. Court to Force SEC Response to 2022 Rulemaking Petition

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