While some experts say the court may dismiss the case, others doubt this could happen, and believe the case will go on. During a New York District Judge Katherine Polk Failla questioned both the SEC and Coinbase for over four hours during oral arguments.
Bloomberg Intelligence senior litigation analyst Elliott Stein believes that Judge Failla will dismiss the case, putting the chances of Coinbase beating the SEC at 70 percent in a post last week.
“Our Thesis: Coinbase is 70% likely to beat the SEC, if not outright on this motion, then later,” Stein wrote. “Even if the case survives, it likely reaches the Supreme Court, which we think will narrow Howey,” Stein wrote, referring to a test that’s based on a 1946 U.S. The Supreme Court case the SEC often cites in determining whether or not an asset is a security.
Strain stated after the hearing that Coinbase has a better chance of winning the case than he initially thought. “Coming out of the hearing, I thought Coinbase did a lot better than I anticipated,” Stein said in an interview.
SEC Faces Tough Questions
During the hearing last week, Judge Failla grilled the SEC, asking its lawyers direct questions about what constitutes a security and expressing concern the agency may be too broad in its definition of securities.
As already known, the SEC still struggles to define what is and what isn’t a security. Judge Failla was skeptical of the SEC’s theory on what constituted securities, Stein said. He added that he could see dismissal, partly due to the questioning of the SEC.
“Her questions were very thorough and tough on both sides, but she did express concern with the SEC’s theory of what constitutes an investment contract,” Stein said.
“We try not to make any 50/50 calls,” Stein said. “Sixty percent would suggest that it’s a very close case. I think parts of this are close, but I’m quite confident on the trading claims and the broker claims that those will be dismissed, and I think there’s good reason to believe that the staking claims will be dismissed too.”
While Stein sees a good chance that the court will dismiss the SEC case, others have said the case will go on, and could proceed to trial by 2025 at the earliest.
“I would not expect the judge to dismiss the case at this stage,” said Samson Enzer, a former federal prosecutor in the U.S. Attorney’s Office for the Southern District of New York, the district where the Coinbase case resides. “That’s not to say she won’t dismiss or trim the case after discovery, either at summary judgment or trial, but I don’t expect her to dismiss the case at this stage.”
Enzer also commented on the Binace case with the SEC, which has also been in court since June last year. He argued that the judge may dismiss the allegation that BUSD listed on the exchange is a security.
“I would bet, but obviously this is speculation, but I think from her comments at the oral argument, I would bet that she at least dismisses the SEC’s claims that BUSD stablecoin was offered or sold as a security. The SEC’s allegations on that are remarkably weak,” Enzer said, and added that the judge honed in on that.