Bloomberg Analyst Predicts Coinbase Likely to Win SEC Lawsuit
Summary:
Bloomberg's senior litigation analyst, Elliot Stein, predicts a 70% chance of a full dismissal in the ongoing lawsuit between cryptocurrency platform Coinbase and the U.S. Securities and Exchange Commission (SEC). Stein praised Coinbase for its precise definition of an "investment contract" during a recent hearing, shifting his confidence toward the crypto exchange's favor. Drawing parallels with Ripple's partial victory against the SEC, Stein suggests the Ripple ruling could influence the outcome of Coinbase's lawsuit. The SEC's allegations, claiming Coinbase violated federal securities laws, have been strongly refuted by the exchange.
Elliott Stein, a top legal expert for Bloomberg, sees a low possibility of an unfavorable outcome for the cryptocurrency platform Coinbase in its continuing legal dispute with the United States Securities and Exchange Commission (SEC). Stein anticipates that the exchange has a 70% chance of achieving a total dismissal of the case. Stein expressed in a recent Jan. 19 post on X (formerly Twitter) that prior to the court hearing, he was certain that Coinbase would be able to successfully contest some SEC allegations, but not the ones connected to its staking rewards scheme and overall business model. However, after the five-hour hearing, his confidence swayed in favor of Coinbase.
The SEC accuses Coinbase of falling under its regulations by staking client assets, earning rewards on customers' behalf, and then redistributing these back to customers. The SEC views this as presenting and selling investment contracts. Furthermore, the SEC alleges that Coinbase was functioning as an unlicensed broker-dealer without having the necessary permits. Coinbase strongly denies these allegations, citing the complexity of obtaining a license for a crypto exchange.
In his post, Stein points out that Coinbase swung the case in its favor by offering a clearer definition of an "investment contract" than the SEC. He agrees with Coinbase's argument that an investment contract entails capital investment in a business, not merely in an ecosystem, bound by an enforceable obligation.
Stein also points out the Ripple's win against SEC back in July 2023 where XRP (XRP) was ruled not to fall under securities in terms of retail sales on cryptocurrency exchanges, and observed that Coinbase's case may be affected by Ripple's ruling in the SEC case. He states, "This ruling implied that the sales of digital assets on public exchanges are not straightforward fits for the Howey criteria to identify investment contracts."
On Jan. 17, Cointelegraph documented that U.S. District Judge Katherine Polk Failla listened to arguments from both SEC and Coinbase regarding the crypto exchange's plea for dismissal over a duration of five hours. Of significance for the crypto industry, Judge Failla asked the SEC lawyers to clarify how the issuance of a digital token fulfilled the criteria of the Howey test and challenged the case for being “too broad.”
The SEC lodged a complaint against Coinbase on June 6, 2023, claiming that Coinbase broke federal securities regulations. The agency contended that 13 tokens listed on Coinbase were securities, including the likes of Solana (SOL), Cardano (ADA), Polygon (MATIC), Filecoin (FIL), The Sandbox (SAND), Axie Infinity (AXS), Chiliz (CHZ), Flow (FLOW), Internet Computer (ICP), NEAR (NEAR), Voyager (VGX), Dash (DASH), and Nexo (NEXO).
Published At
1/21/2024 8:29:06 AM
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