Winning Probability Favors Coinbase against the SEC, According to Stein
- There is a 70% probability of a complete rejection of the SEC’s allegations against Coinbase.
- The SEC accuses Coinbase of operating as an unregistered broker.
- The Ripple case could have an impact on Coinbase’s trial.
Elliott Stein, Bloomberg’s senior litigation analyst, has reevaluated Coinbase’s chances in its ongoing lawsuit against the United States Securities and Exchange Commission (SEC) after attending a crucial hearing.
Initially skeptical, Stein is now convinced that Coinbase has about a 70% chance of getting a complete dismissal of the SEC’s allegations.
I went to the SEC hearing against Coinbase thinking that COIN, on this motion, would get dismissal of the SEC’s major claims (regarding trading), but maybe not the claims about staking and brokering. I left thinking COIN would get a complete dismissal.”
Stein said.
As a reminder, the SEC accuses Coinbase of operating as an unregistered broker and offering investment contracts by staking clients’ assets for rewards.
However, Coinbase’s defense has been strengthened by a more precise definition of an “investment contract“ surpassing the SEC’s definition, emphasizing investment in a company rather than just an ecosystem.
The Ripple Victory Could Impact the Trial
The Ripple case, where a partial victory was obtained in July 2023, plays a significant role in this context. The decision regarding XRP, which is not considered a security during retail sales on cryptocurrency exchanges, could heavily influence Coinbase’s trial against the SEC.
Stein points out that the definition of digital assets and their classification as securities is not clearly defined in the Howey test used to determine what constitutes an investment contract.
“As suggested by the July Ripple ruling, the sales of digital assets on public exchanges do not perfectly match the Howey test for determining what constitutes an investment contract.”
Stein stated.
Furthermore, the discussions during the hearing highlighted the challenges of categorizing digital token issuances according to the Howey test criteria, a question that Judge Katherine Polk Failla found to be “too broad“. This case, which began on June 6, 2023, could have significant implications not only for Coinbase but also for the entire cryptocurrency ecosystem.
