Legal researcher Elliott Stein remembers being much more upbeat about bitcoin exchange Coinbase’s prospects of winning after the hearing.
In its continuing case against the United States Securities and Exchange Commission (SEC), cryptocurrency exchange Coinbase has suggested that it sees little chance of failing. This is according to Elliott Stein, senior legal analyst at Bloomberg. According to Stein, the exchange has a 70% probability of getting the lawsuit completely dismissed.
Stein clarified in a recent post on January 19 on X (previously Twitter) that, before to entering the courtroom, he was positive Coinbase would be able to successfully challenge some SEC accusations, but not those that dealt with its staking rewards programme and general operational framework. His confidence did, however, change following the five-hour hearing:
“I entered the SEC v. Coinbase hearing with the expectation that COIN would succeed in having the SEC’s main trading-related claims dismissed on this motion, but perhaps not the staking and broker allegations. I departed believing COIN would be completely dismissed.
According to the SEC, Coinbase is participating in the offer and sale of investment contracts by staking customers’ assets, collecting rewards on their behalf, and then returning them. This activity puts Coinbase under SEC jurisdiction.
Moreover, Coinbase was allegedly functioning as an unregistered broker, according to the regulator. Coinbase, meanwhile, has categorically denied this, claiming that registering for a licence is not a simple process for a cryptocurrency exchange. But as Stein points out, it was revolutionary when Coinbase gave a clearer definition of a “investment contract” than the SEC.
He said, “I think the Coinbase one is more compelling because it requires investment in a business rather than just an ecosystem, and it also has an enforceable obligation.”
In July 2023, Ripple secured a partial victory in the Ripple v. SEC case, as he mentioned in his statement. As far as retail sales on cryptocurrency exchanges are concerned, the judge decided that XRP is not a security. According to Stein, Coinbase’s lawsuit will be impacted by the securities ruling in this case.
“As the Ripple ruling in July suggested, sales of digital assets on public exchanges don’t fit neatly into the Howey test for what constitutes an investment contract,” he stated.
After hearing arguments from the SEC and Coinbase over the cryptocurrency exchange’s move for dismissal, United States District Judge Katherine Polk Failla reportedly spent five hours deliberating the case on January 17. Failla argued that the case was “too broad” and urged the SEC attorneys to explain why a digital token issue would pass the Howey test. This was a significant point for the cryptocurrency ecosystem. On June 6, 2023, the SEC filed a lawsuit against Coinbase, claiming that the cryptocurrency exchange had broken federal securities laws.
According to the agency, 13 tokens that were listed on Coinbase—coins like The Sandbox (SAND), Axie Infinity (AXS), Chiliz (CHZ), Flow (FLOW), Internet Computer (ICP), NEAR (NEAR), Voyager (VGX), Dash (DASH), and Nexo (NEXO)—were securities.