.png)
Elliott Stein, senior litigation analyst at Bloomberg, projects that Coinbase's case against the US Securities and Exchange Commission (SEC) has a 70% chance of success.
Read Also: What Exactly Was the Big Mistake in the SEC X Hack?
The SEC and Coinbase lawsuit heats up
A few days ago, the SEC's legal action against Coinbase changed course when Judge Katherine Polk Failla asked the regulator's attorneys an intriguing question. The federal judge asked the regulator to identify the particular characteristics of a token that make it an investment contract, based on the theory that the SEC's definition and explanation of some terms related to cryptocurrencies are unclear.
According to Stein, this request appeared to offer Coinbase an immediate advantage over the securities watchdog, and it is now more probable that the American bitcoin exchange will prevail.
Judge Failla observed that the regulator's definition of a "investment contract" should have a limiting criterion that excludes collectibles.
The definition provided by Coinbase, in the opinion of the Bloomberg litigation analyst, is stronger than the securities regulator's. According to Coinbase, investing in a business was necessary instead of merely in an environment.
Grayscale and Ripple Priorities
Stein continued by noting Ripple's July 2023 victory over the SEC, which implied that the Howey Test's concept of an investment contract did not entirely encompass the purchases of digital assets on open exchanges.
After almost three years of legal wrangling with the SEC, Judge Analisa Torres ultimately decided that XRP is not a security as a result of this reasoning. Ripple ultimately won this case. Coinbase is now subject to the same argument. When Judge Torres rendered his decision in the XRP case, the SEC was concerned that it would have an adverse effect on other pending litigation, such as those involving Binance and Coinbase.
Regulators, regrettably, have not had it easy in the months that have followed Ripple's victory. Grayscale, an asset management company, also prevailed in a dispute brought by the SEC. The company previously attempted, but kept running into obstacles, to convert its Grayscale Bitcoin Trust (GBTC) to a physically-backed ETF.
After a protracted legal battle, it eventually sued the SEC, and the judge declared that the agency had neglected to acknowledge the "obvious financial and mathematical relationship between the spot and futures markets.
Ultimately, the court ordered the SEC to take into account Grayscale's GBTC, a decision that many felt was crucial in getting the SEC to approve the spot Bitcoin ETF products that are currently trading in the US. Coinbase appears to be the next cryptocurrency company to prevail in a lawsuit against the authorities.