Analyst Anticipates Coinbase’s 70% Probability of Achieving Legal Success in Coinbase vs. SEC Dispute
Bloomberg Intelligence’s senior litigation analyst, Elliott Z. Stein, predicts that Coinbase, the leading U.S. cryptocurrency exchange, has a 70% chance of winning its ongoing legal battle with the Securities and Exchange Commission (SEC). The dispute revolves around allegations of securities offerings and brokerage practices.
Stein’s assessment first came to light in a post he made on January 19th. He spoke after a court hearing and stated that Coinbase has presented a strong argument, distinguishing altcoin trading services from illegal securities offerings. While both parties agree that altcoins are not unregistered securities, the classification of “investment contract” remains challenging for the U.S. District Court for the Southern District of New York, presided over by Judge Katherine Polk Failla.
The Coinbase-SEC case has attracted significant attention, particularly when Judge Katherine Polk Failla questioned why the case should not be dismissed. Notably, influential figures such as Senator Cynthia Lummis have strongly supported Coinbase’s position.
Coinbase has vigorously denied the allegation that token purchases imply an agreement between the issuer and buyer, arguing against its classification as an investment contract. Elliott Z. Stein, who initially anticipated a partial dismissal of the SEC’s claims, now believes that Coinbase is likely to have the entire case dismissed. Stein’s track record, accurately predicting Grayscale’s success against the SEC in March 2023, lends credibility to his positive outlook for Coinbase’s legal prospects.
Stein also refers to the recent legal victory of Ripple against the SEC in the Ripple v. SEC case, suggesting that the traditional Howey test may not be applicable to the sale of digital assets on public exchanges. This observation implies a potential challenge to the conventional understanding of what constitutes an investment contract. Stein envisions Coinbase’s strong chances of defending its right to trade altcoins, possibly even before the Supreme Court.
Despite the complexity of the legal issues involved, Stein remains optimistic about the timeline and expects a ruling by the end of the second quarter of 2024. This development highlights the potential for Coinbase to secure a significant legal victory, which will further shape the regulatory landscape for cryptocurrency exchanges in the United States.