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01/22/2024

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Litigation Analyst Credits Coinbase with 70% Triumph Over SEC lawsuit - Herald Sheets

Legal analyst Elliott Stein reflects on crypto exchange Coinbase arguments as likely to secure victory over the US Securities and Exchange Commission (SEC). The legal expert affirmed optimism that Coinbase has a 70% probability of securing victory. Bloomberg's lead litigation analyst Elliot Stein considers a minimal likelihood that Coinbase would lose in the ongoing suit against the Gary Gensler-led SEC. The litigation analyst forecasts that the US largest crypto exchange has 70% potential to secure a complete dismissal of the lawsuit.

Litigation Analyst Credits Coinbase with 70% Triumph Over SEC lawsuit - Herald Sheets
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Legal analyst Elliott Stein reflects on crypto exchange Coinbase arguments as likely to secure victory over the US Securities and Exchange Commission (SEC). The legal expert affirmed optimism that Coinbase has a 70% probability of securing victory.  

Bloomberg’s lead litigation analyst Elliot Stein considers a minimal likelihood that Coinbase would lose in the ongoing suit against the Gary Gensler-led SEC. The litigation analyst forecasts that the US largest crypto exchange has 70% potential to secure a complete dismissal of the lawsuit.

Stein illustrated in a Friday, January 19 post on X that prior to entering the courtroom, he believed that Coinbase could object to several claims by SEC. Nonetheless, he excluded the allegations involving the staking rewards program and those involving operational structure. 

Coinbase’s Definition of Investment Contract

Stein admitted a confidence shift following the five-hour hearing. He illustrates that COIN could successfully challenge and win the dismissal of the primary claims involving trading. The session portrayed the likelihood of COIN winning full dismissal, even in claims relating to brokerage and staking. 

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The securities watchdog indicates that Coinbase staked customer assets to earn rewards on the client’s behalf and returned them. By doing so, the SEC alleges that such amounts to offering and selling investment contracts – a process under its regulation

Stein observes that the SEC claims the Brian Armstrong-led Coinbase runs unregistered broker operations. Coinbase vigorously refutes the allegations, indicating that there is no easy way for the crypto exchange to register and secure approval for the operating license.  

Stein demonstrates that the case encountered a turning point when Coinbase offered a more precise description of the investment contract. He considers that the Coinbase definition offers a more compelling account that requires investment in the business versus one in an ecosystem attracting enforceable obligation. 

Stein referenced the court ruling by Judge Analisa Torres in SEC versus Ripple. The judge delivered partial victory in July last year, indicating that XRP’s involvement in retail sales on the crypto exchanges is not a security. 

Stein observes that the decision involving securities in Ripple’s ruling will yield a domino effect on the arguments advanced in the Coinbase lawsuit. 

Stein argued that the Ripple ruling delivered in July 2023 downplayed the digital assets sale on the public exchanges would fit neatly within the Howey test on what qualifies as an investment contract. 

A review of Friday, January 17 events saw the US District Judge Katherine Failla hear arguments from both parties in the SEC versus Coinbase case. The defendant tabled the motion seeking dismissal of the lawsuit within the five-hour session. 

Requirements for Howey Test Surfaces in Coinbase v SEC Case

A notable point relating to the crypto community arose when Failla required the SEC attorneys to demonstrate when the digital token issuance satisfies the Howey test, indicating that the case portrayed an overly broad argument.  

The case arose on June 6 last year when the SEC leveled charges alleging that the Coinbase crypto exchange contravened several federal securities laws. The regulator’s argument detailed 13 tokens that Coinbase listed and that constituted tokens. 

The regulator illustrated that several altcoins led by Solana (SOL), Flow, Polygon (MATIC), Internet Computer, and Cardano (ADA) were securities. The list featured Sandbox, Filecoin (FIL), Chiliz (CHZ), Voyager (VGX), Nexo (NEXO), Dash, Axie Infinity, and Near. 

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