As the lawsuit between the U.S. Securities and Exchange Commission (SEC) and American cryptocurrency platform Coinbase progresses, Judge Katherine Polk Failla has expressed doubts about the SEC’s stance and purpose in initiating the lawsuit. This turn of events appears to swing the balance toward Coinbase, with the judge exhibiting close attention and possibly a leaning toward the exchange’s reasoning. Momentum Builds for Coinbase’s Defense. In June, the Securities and Exchange Commission (SEC) initiated legal action against Coinbase, claiming that the platform enabled the trading of cryptocurrency tokens that were required to be registered as securities. The SEC charged that Coinbase functioned without proper registration as a national securities exchange, a broker, and a clearing agency. The regulator specifically targeted Coinbase’s “staking” feature, a service that allows users to accumulate assets collectively and receive incentives for confirming transactions on blockchain systems. Nonetheless, the apparent doubt shown by Judge Failla has raised questions about the robustness of the SEC’s argument. Meanwhile, in other news, the launch of Solana Mobile generated a massive surge in preorders, with 30,000 devices being snapped up on the initial day. Elliot Z. Stein, a senior litigation analyst at Bloomberg, believes Coinbase is highly likely, with a 70% chance, to prevail in the current legal battle. Stein’s reasoning includes the judge’s eagerness to set a definitive criterion for what constitutes an “investment contract” in a way that excludes collectibles. According to Stein, the definition offered by Coinbase, which accentuates the need for an investment to be tied to a business and include a binding commitment, appears to be more persuasive. Stein points out that modern decisions, like the Ripple case from July, suggest transactions of digital assets on public marketplaces do not align cleanly with the Howey test, which is typically utilized for identifying investment contracts. Furthermore, the exchange has forcefully contested the SEC’s claims, maintaining that the agency has not conclusively shown that the exchange performed any broker duties. Is it expected that the verdict in the Coinbase case will be known by the second quarter? Following the initial legal encounter, Bloomberg’s lead litigation analyst underscored a key issue. Stein anticipates that the verdict for the ongoing case should be announced by the close of the first half of 2024; given Judge Failla’s reputation for swift adjudication, the decision might come sooner. Crucially, should Coinbase emerge victorious, it could markedly influence the regulatory strategies of SEC Chairman Gary Gensler, especially regarding his approach of managing the cryptocurrency sector via regulatory measures. Since taking charge, Gensler has launched more than fifty enforcement proceedings related to cryptocurrencies. Winning the case against Coinbase would support the initiatives championed by SEC Chairman Gary Gensler.