Coinbase Has a High Chance of Winning Lawsuit Against SEC, Says Bloomberg Analyst
Bloomberg senior litigation analyst, Elliott Stein, believes that cryptocurrency exchange Coinbase has a strong chance of prevailing in its ongoing legal battle against the United States Securities and Exchange Commission (SEC). Stein predicts a 70% probability of Coinbase securing a full dismissal in the lawsuit.
Confidence Grows as Coinbase Presents Strong Defense in SEC Lawsuit
Stein took to social media to express his initial confidence in Coinbase’s ability to successfully object to certain SEC claims. However, after observing the five-hour courtroom hearing, Stein’s confidence grew even more. He now believes that Coinbase will be granted full dismissal, rather than just partial dismissal as originally thought.
SEC Alleges Coinbase’s Staking Rewards Program Violates Securities Laws
The SEC claims that Coinbase’s staking rewards program, which involves staking customers’ assets and earning rewards on their behalf, constitutes the offer and sale of investment contracts. As a result, the SEC argues that Coinbase should fall under its regulation and be considered an unregistered broker.
Coinbase Provides Precise Definition of “Investment Contract”
During the court proceedings, Coinbase presented a more precise definition of an “investment contract” compared to the SEC’s interpretation. This definition, according to Stein, is more compelling as it requires an investment in a business rather than just an ecosystem. Additionally, Coinbase argues that there is no straightforward process for a cryptocurrency exchange to register for a license.
Ripple Case Ruling Could Impact Coinbase’s Lawsuit Outcome
Stein draws attention to the Ripple v SEC case, where Ripple achieved a partial victory in July 2023. In that case, the judge ruled that the XRP token is not considered a security when it comes to retail sales on cryptocurrency exchanges. Stein suggests that this ruling could have a domino effect on Coinbase’s lawsuit, potentially leading to a favorable outcome for the exchange.
Judge Questions SEC’s Broad Interpretation of the Howey Test
In another notable moment during the courtroom hearing, United States District Judge Katherine Polk Failla asked the SEC attorneys to explain why a digital token issuance would meet the Howey test. Failla argued that the case appeared to be “too broad,” raising questions about the SEC’s interpretation of securities laws in the context of cryptocurrency.
The outcome of the Coinbase vs. SEC lawsuit could have significant implications for the regulation of digital assets and the broader cryptocurrency industry. As the legal battle continues, industry experts and market participants eagerly await the final decision, which could shape the future of cryptocurrency regulations in the United States.
Analyst comment
Positive news. Short-term market outlook: The market will likely react positively to the news, as it increases confidence in Coinbase’s ability to win the lawsuit and secure a full dismissal. This could lead to a positive sentiment among investors and potentially boost the value of cryptocurrencies. However, further developments in the Ripple v SEC case and the final decision in the Coinbase vs SEC lawsuit will heavily influence market dynamics.
