Coinbase vs. SEC: Analyst Predicts 70% Chance of Legal Victory for Coinbase

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Bloomberg Intelligence’s senior litigation analyst, Elliott Z. Stein, has expressed a 70% likelihood that Coinbase, the leading U.S. cryptocurrency exchange, will emerge victorious in its legal case with the Securities and Exchange Commission (SEC). The dispute centers around alleged securities offerings and brokerage practices. 

With 70% Changes, Analyst Sees Coinbase Legal Win

It started with Stein’s Jan. 19 X post. He spoke after a court hearing. According to Stein, Coinbase has presented a robust argument, defining altcoin trading services as distinct from illegal securities offerings. Although both parties accepted that altcoins aren’t unregistered securities, the classification of “investment contract” remains difficult for the U.S. District Court for the Southern District of New York, presided over by Judge Katherine Polk Failla.

The market closely watched the Coinbase-SEC case, particularly when Judge Katherine Polk Failla questioned why the case shouldn’t be dismissed. Notably, influential figures, including Senator Cynthia Lummis, supported Coinbase’s position substantially.

Coinbase’s Response

Coinbase has strongly denied the allegation that token purchases imply an agreement between the issuer and buyer, arguing against classifying it as an investment contract. In this context, Elliott Z. Stein, who initially expected a partial dismissal of the SEC’s claims, now believes Coinbase is poised for a complete dismissal. Stein’s positive track record, accurately predicting Grayscale’s success against the SEC in March 2023, adds weight to his optimistic outlook for Coinbase’s legal prospects.

Analyst’s Retake on Legal Scoop’s

Referring to the Ripple v. SEC case, Stein highlights Ripple’s recent legal victory against the SEC as evidence that the traditional Howey test may not correctly apply to the sale of digital assets on public exchanges. His observation suggests a potential challenge to the conventional understanding of what qualifies as an investment contract. He foresees Coinbase’s strong chances to defend its right to trade altcoins, even before the Supreme Court.

Despite the legal intricacies, Stein remains optimistic about the timeline, expecting a ruling by the end of Q2 2024. This development underscores the potential for Coinbase to secure a significant legal win, further shaping the regulatory landscape for cryptocurrency exchanges in the United States.