On Tuesday, the leading U.S. crypto exchange Bitcoin, which the agency has agreed should be treated as a commodity like gold or oil, the SEC has maintained that nearly every other digital asset is a security, and therefore under its purview. That also means that because the vast majority of issuers, exchanges, and custodians for cryptocurrencies do not register with the SEC, they are violating securities laws.

The SEC has brought a number of high-profile lawsuits against both top issuers and exchanges, beginning with with a 2020 complaint against Ripple, the company behind the popular XRP cryptocurrency, under Chair Jay Powell. This was followed by a string of enforcement actions led by Powell's controversial successor, Chair Gary Gensler. In these cases, the SEC has argued that companies like Coinbase are breaking key laws by offering unregistered securities like Solana to investors on its platform.

Because the cases have appeared before different judges and federal courts, the resulting legal rulings have been mixed, with some judges (including Failla) appearing to side with the SEC's arguments, and others, such as the judge overseeing the Ripple suit, taking issue with the agency's stances and arguing that the sale of cryptocurrencies do not always constitute investment contracts.

In March, Failla denied the key aspects of Coinbase's motion to dismiss the SEC's lawsuit—an expected move, but one that suggested that she would side with the SEC in her final decision. In her ruling, Failla rejected Coinbase's argument that crypto should count as a "major question" of economic significance, and therefore limit the SEC's interpretation of securities oversight, as well as that the exchange had not received fair notice of the agency's approach to supervision. She also argued that the offer and sale of cryptocurrencies on Coinbase's platform appeared to be investment contracts, and therefore should be treated as securities. Failla did, however, agree to throw out a portion of the SEC's case concerning self-custodied wallets.

While the decision created a murky path forward for Coinbase, contrasting rulings by other judges meant the final decision at the case would almost certainly occur at the appellate level, and possibly even to the Supreme Court. A loss would significantly impact Coinbase's ability to operate by limiting the types of assets it could offer. With her ruling on Tuesday, Failla agreed that "conflicting decisions on an important legal issue necessitate the Second Circuit's guidance." The Ripple lawsuit will also likely move to the Second Circuit.