An analyst for Bloomberg Intelligence placed Coinbase’s chances of prevailing in its legal battle with the U.S. Securities and Exchange Commission (SEC) at an optimistic 70%.
In a Jan. 19 post on social media platform X (formerly Twitter), Elliot Stein, Bloomberg Intelligence’s senior litigation analyst, suggested that the cryptocurrency trading platform was likely to secure a complete dismissal of the regulatory case based on developments in the recent court hearing.
“I went into SEC v. Coinbase hearing thinking COIN would, on this motion, win dismissal of SEC’s primary claims (concerning trading) but maybe not staking and broker claims. I left thinking COIN would win full dismissal,” Stein stated.
Crypto previously reported that Judge Katherine Polk Failla questioned why she should not dismiss the case, considering Coinbase’s stance 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 proposed definition of the term was more persuasive as it emphasized the necessity of investing in a business rather than merely an ecosystem, coupled with the presence of an enforceable action.
Throughout the case, Coinbase has consistently asserted that its platform does not facilitate trading “investment contracts.”
The company’s Chief Legal Officer, Paul Grewal, said the SEC’s insistence contradicts established legal precedents, including decades of Supreme Court decisions. Grewal said:
“By ignoring that precedent, the SEC has violated due process, abused its discretion, and abandoned its own earlier interpretations of the securities laws. By ignoring that precedent, the SEC has trampled the strict boundaries on its basic authority set by Congress.”
Other reasons
The analyst highlighted Ripple’s recent legal triumph against the regulator as further evidence that the traditional Howey Test may not seamlessly apply to digital assets sales on public exchanges.
According to him, this challenges the conventional notion of what qualifies as an investment contract. Stein further speculates that if the case advances to the Supreme Court, it will likely result in a more refined interpretation of the Howey Test, potentially narrowing its scope.
In addition, Stein asserted that the crypto trading platform effectively countered the SEC’s staking claims. Stein concluded:
“And Coinbase had good arguments that the SEC’s allegations don’t sufficiently plead that it was performing broker functions.”
