Elliott Stein, a senior litigation analyst at Bloomberg, estimated that cryptocurrency exchange Coinbase has a 70% chance of victory in its ongoing lawsuit against the U.S. Securities and Exchange Commission (SEC).
Stein's prediction is based on his belief that Coinbase's definition of “investment contract” is more precise than the one provided by the SEC, which could be a turning point in the case.
Stein, SEC v. He attended the Coinbase hearing thinking Coinbase would win the SEC's dismissal of its primary trading-related claims, but perhaps not the staking and brokerage claims. However, he left the hearing completely convinced that Coinbase would win the case.
Stein said the following on the subject:
“We think Coinbase is likely to win this claim. The judge asked for a limiting principle to the SEC's definition of 'investment contract' that would not include collections. We think the definition offered by Coinbase is more attractive, requiring an investment in a business and not just an ecosystem, and requiring an enforceable obligation .”
He also explained that selling digital assets on public exchanges, as suggested by the Ripple decision in July, does not fully comply with the Howey test for what constitutes an investment contract. Even if the case proceeds, it will likely reach the Supreme Court, where the court will narrow down to Howey, according to Stein.
Stein also believes Coinbase's definition of “investment” will defeat the SEC's staking allegations. He added that Coinbase has good arguments that the SEC's allegations do not adequately claim that it is performing broker functions.
*This is not investment advice.
