Will Judge Dismiss SEC 's Lawsuit Against Coinbase?

Experts are divided on the likelihood of a judge dismissing an SEC lawsuit against Coinbase.

Last week, New York District Judge Katherine Polk Failla questioned both the SEC and the exchange for more than four hours during oral arguments.

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Coinbase was sued by the SEC last year for allegedly operating as an unregistered exchange, broker, and dealer. The regulator also took issue with Coinbase’s staking and wallet services.

Coinbase has argued for the dismissal of the lawsuit, and accused the regulator of adopting a “regulation by enforcement approach.”

Experts talk about SEC and Coinbase

Experts say Judge Failla could rule to dismiss the lawsuit. Elliott Stein, a senior litigation analyst at Bloomberg Intelligence, pegged Coinbase’s chances of beating the SEC at 70% in a post last week.

“Our thesis: Coinbase has a 70% chance of beating the SEC later, if not directly with this proposal,” Stein wrote.

Citing the test based on the 1946 U.S. Supreme Court case that the SEC often cites in determining whether an asset is a security, Stein wrote, “Even if the case proceeds, we think it will likely reach the Supreme Court and that this will narrow Howey.“

The analyst, who attended the hearing, said he believes Coinbase has a good chance of being dismissed as to the trading of assets on its platform, but less so as to the staking and wallet demands made by the agency.

“I thought Coinbase did much better than I expected coming out of the hearing,” Stein said in an interview.

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The judge questioned the SEC at length during last week’s hearing, asking its attorneys direct questions about what a security is and saying the agency’s definition of security is too broad.

The judge said she was skeptical of the SEC’s theory of what constitutes securities, but added that the exchange made compelling arguments about the wallet and staking claims.

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