Prior to the March convention, the Trotskyist "Socialist Appeal" faction held an organizational gathering of their own, meeting in Chicago, with 93 delegates gathering from February 20–22, 1937. The meeting organized the faction on a permanent basis, electing a National Action Committee of five to "coordinate branch work" and "formulate Appeal policies." Two delegates from the Clarity caucus were in attendance. James Burnham vigorously attacked the Labour and Socialist International, the international organization of left wing parties to which the Socialist Party belonged, and tension rose along these lines among the Trotskyists. United action between the Clarity and Appeal groups was not forthcoming and an emergency meeting of Vincent Dunne and Cannon was held in New York with leaders of the various factions including Thomas, Jack Altman, and Gus Tyler of Clarity. At this meeting Thomas pledged that the upcoming convention would make no effort to terminate the newspapers of the various factions.
No action was taken at the 1937 convention to expel the Trotskyist "Appeal faction," but pressure did continue to build along these lines, fueled by the CPUSA's increasingly hysterical denunciations of Trotsky and his followers as wreckers and agents of international fascism. The convention did pass a ban on future branch resolutions on controversial matters, an effort to rein in the activities of the factions at the local level. It also did ban factional newspapers, a move directly targeting The Socialist Appeal, and formally established The Socialist Call as the party's national organ.
Constance Myers indicates that three factors led to the expulsion of the Trotskyists from the Socialist Party in 1937: the divergence between the official Socialists and the Trotskyist faction on the issues, the determination of Altman's wing of the Militants to oust the Trotskyists, and Trotsky's own decision to move towards a break with the party. Recognizing that the Clarity faction had chosen to stand with the Altmanites and the group around Thomas, Trotsky recommended that the Appeal group focus on disagreements over Spain to provoke a split. At the same time, Thomas, freshly returned from Spain, had come to the conclusion that the Trotskyists had joined the SP not to make it stronger, but to capture the organization for their own purposes. On June 24–25, 1937, a meeting of the Appeal faction's National Action Committee voted to ratcheted up the rhetoric against American Labor Party and Republican nominee for mayor of New York Fiorello LaGuardia, a favorite son of many in Socialist ranks, and to reestablish their newspaper, The Socialist Appeal. This was met with expulsions from the party beginning August 9 with a rump meeting of the Central Committee of Local New York, which expelled 52 New York Trotskyists by a vote of 48 to 2, with 18 abstentions, and ordering 70 more to be brought up on charges. Wholesale expulsions followed, with a major section of the YPSL leaving the party with the Trotskyists.
Secretary of Local New York Jack Altman declared that the Trotskyists "were expelled for attempting to undermine the Socialist Party, for loyalty and allegiance to an opponent organization, the Bureau of the Fourth International, and for refusing to abide by the decisions and discipline of the National convention, the National Executive Committee, and the City Central Committee of the party, and for no other reason." Editor Gus Tyler of The Socialist Call echoed Altman's sentiments, emphasizing that "the Trotskyites have, during the last week ,...abandoned the usual means of inner party controversy — debate and appeals through party channels — and, like the Old Guard, have carried their argument into the public, into the capitalist press." The issuance of a statement by the Trotskyist faction to the New York Times and the relaunch of their own newspaper, The Socialist Appeal, was seen as particularly galling by the Call's' editor.