Legal Experts Believe Coinbase Could Secure Victory in Legal Battle Against SEC
Coinbase appears to have a strong chance of winning its legal battle against the U.S. Securities and Exchange Commission (SEC), according to legal experts. After hearing Coinbase’s oral arguments, Bloomberg’s Senior Litigation Analyst Elliot Z. Stein gives the crypto exchange a 70% likelihood of securing victory in its motion to dismiss all claims made against it by the SEC.
Coinbase’s Motion Claims Tokens Do Not Meet the Definition of Investment Contracts
In its motion filed in June, Coinbase argued that the tokens named in the SEC’s lawsuit do not meet the definition of an investment contract and therefore cannot be considered securities. Coinbase also maintains that it is not an unregistered securities exchange.
Judge Questions SEC’s Definition of “Investment Contract”
Judge Katherine Polk Failla expressed skepticism about the SEC’s definition of “investment contract” during the hearing. She wanted clarification that would exclude collectible items like Beanie Babies from being considered securities.
Compelling Definition Presented by Coinbase
Stein found Coinbase’s definition of an investment contract more compelling than the SEC’s. Coinbase’s definition requires investors to purchase a stake in a business rather than just an ecosystem. This would exempt both crypto sales on Coinbase’s platform and its staking-as-a-service business from SEC regulation.
The Case May Reach the Supreme Court
If the case survives, Stein believes it is likely to reach the Supreme Court, which could potentially narrow the scope of the Howey Test—a legal standard for identifying investment contracts established in the 1940s.
Experts Divided on Outcome
Opinions differ among legal experts regarding the outcome of the case. While Stein is optimistic about Coinbase’s chances, Joe Carlasare, a partner at the Amundsen Davis law firm, believes outright dismissal of all claims is unlikely. Carlasare explains that under a motion to dismiss, the complaint must be viewed in favor of the plaintiff, and Coinbase must prove that all of the SEC’s claims are legally insufficient.
SEC Faces Previous Defeats
The SEC has already lost two major crypto-related cases last year, indicating potential challenges in its legal battle against Coinbase. These losses include cases against Ripple Labs and Grayscale.
Hot Take: Coinbase Stands a Good Chance of Victory Against SEC
Coinbase’s legal battle against the SEC could result in a victory for the crypto exchange. Experts believe that Coinbase’s arguments are strong and that the district court is likely to side with the company. However, there is still uncertainty regarding the outcome, and it is possible that the case may be appealed to a higher court. This legal showdown between Coinbase and the SEC has significant implications for the regulation of cryptocurrencies and could potentially shape future decisions regarding investment contracts in the crypto industry.
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