Coinbase Lawsuit against SEC Takes a New Turn
The SEC’s lawsuit against Coinbase has entered a new phase as Judge Katherine Polk Failla posed an important question to the regulator’s lawyers. The judge requested that the SEC clarify the specific features of a token that classify it as an investment contract. This request has given Coinbase an advantage in the case, increasing the likelihood of a victory for the exchange.
According to Bloomberg’s Senior litigation analyst Elliott Stein, Judge Failla’s request indicates that she wants a more precise definition of an “investment contract” that excludes collectibles. Stein believes that Coinbase’s definition, which requires investment in a business rather than just an ecosystem, is more convincing than that of the SEC.
Ripple and Grayscale Precedents
Stein also references Ripple’s recent victory against the SEC, where Judge Analisa Torres declared that XRP is not a security. This precedent suggests that digital asset sales on public exchanges may not fit within the Howey Test’s definition of an investment contract. The same argument can now be applied to Coinbase’s case.
In addition, investment asset management firm Grayscale won a lawsuit against the SEC regarding its Grayscale Bitcoin Trust (GBTC). The court ruled that the SEC failed to recognize the relationship between spot and futures markets, ultimately leading to the approval of spot Bitcoin ETF products. These precedents indicate that Coinbase has a strong chance of winning its lawsuit against the SEC.
Hot Take: Coinbase Has a 70% Chance of Winning Lawsuit Against SEC
Bloomberg’s Senior litigation analyst Elliott Stein believes that Coinbase has a 70% chance of winning its lawsuit against the United States Securities and Exchange Commission (SEC). Judge Failla’s request for clarification on the definition of an “investment contract” gives Coinbase an advantage in the case. Furthermore, recent precedents set by Ripple and Grayscale winning their respective lawsuits against the SEC indicate that Coinbase may follow suit. If Coinbase emerges victorious, it could have significant implications for other ongoing lawsuits against the SEC in the crypto industry.
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