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A Bloomberg Intelligence analyst puts Coinbase's chances of prevailing in its legal battle with the U.S. Securities and Exchange Commission (SEC) at 70%.
In a January 19 job On social media platform from the recent court hearing.
“I went to the SEC hearing against Coinbase thinking PIECE OF MONEY could, on this motion, get the SEC's primary claims (regarding trading) dismissed, but perhaps not the staking and broker claims. I left thinking COIN would get a complete dismissal,” Stein said.
CryptoSlate previously reported that Judge Katherine Polk Failla questioned why she should not dismiss the case, given that Coinbase's position finds support from influential stakeholders like Senator Cynthia Lummis.
Why Coinbase Could Win
Stein revealed that Judge Failla wanted the SEC to define “investment contract,” excluding collectibles.
The analyst further explained that Coinbase's definition of the term was more compelling because it emphasized the need to invest in a company rather than just an ecosystem, coupled with the presence of enforceable action.
Throughout the case, Coinbase has consistently maintained that its platform does not facilitate the trading of “investment contracts.”
The company's general counsel, Paul Grewal, said the SEC's insistence contradicts established legal precedent, including decades of Supreme Court rulings. Grewal said:
“By ignoring this precedent, the SEC violated due process, abused its discretion, and abandoned its own prior interpretations of the securities laws. By ignoring this precedent, the SEC has trampled on the strict limits on its fundamental authority set by Congress.
Other reasons
The analyst pointed to Ripple's recent legal triumph against the regulator as further evidence that the traditional Howey test may not apply seamlessly to sales of digital assets on public exchanges.
He says this challenges the conventional notion of what an investment contract is. Stein further speculates that if the case goes to the Supreme Court, it will likely result in a more refined interpretation of the Howey test, which could narrow its scope.
Furthermore, Stein claimed that the cryptocurrency trading platform effectively countered the SEC's staking claims. Stein concluded:
“And Coinbase had a good argument that the SEC’s allegations don’t make a strong enough case for it to serve as a broker-dealer.”
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