Five hours in court, and the fate of Coinbase as a going concern hangs in the balance. Recently, the two parties squared off in a federal court over Coinbase’s motion to dismiss the SEC’s case. However, due to the case’s complexity, the judge asked for more time to weigh the dismissal.
00:00 Intro
00:26 Opening Statement
01:11 Why are we here?
03:21 Judge mocks SEC
05:08 Judge gets frustrated
06:31 Chiliz & XRP Case
07:41 Why is Bitcoin an exception?
09:17 SEC’s Staking Defense was weak
10:55 SEC Admission of class-action lawsuit chaos
12:28 Collectibles: Judge Destroys SEC
14:34 Coinbase on Collectibles Argument being Weak
15:17 Lummis contacted Judge
17:46 Coinbase closing argument
19:52 Judge final words
20:41 Outro
#Crypto #Coinbase #Bitcoin
~Coinbase v. SEC Recap 🔥Judge Grills SEC Lawyers🔥~
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Coinbase hearing was live yesterday and The issue was it wasn't live it was only Recorded So if you got on the conference Call you were lucky what we did is broke This down for you guys you're going to Love it uh it'll give you kind of a full Run of all the clips and what really Mattered from this hearing my name is Paul Baron welcome back in the tech path Let's just go right into it there's Several Clips here we'll get to uh we'll Set up this first one which is where and What the judge said about what is all This about listen in what is the conduct About which the commission complains Precisely what it is that you believe Coinbase is doing as to each that runs The foul of the Securities laws what we Contend is that there are securities Transactions that are taking place on Coinbase's platform which would mean That coinbase is currently operating as An unregistered exchange and an Unregistered clearing Agency so that just kind of sets it up Of what the the SEC is uh basically Alluding to uh we're going to go into This next clip because it gets into the Questions um around why and what they're Trying to achieve with this motion to Deny listen in I'd like to understand That a little bit more I I I believe the Coinbase disagrees with you and says It's not that big a deal but you made
Mention of the um weakness of it I'd Like to understand why why I should care If what you're arguing is the co base is Somehow by providing these Intermediation Services violating the Securities laws that the actual token Issuers are themselves violating the Securities laws is that correct well not Exactly your honor because when when the Issuers decided to issue these tokens um SA or so for example do you believe they Were issuing Securities if if yes your honor yes There we were you're saying that as to These 12 or 13 tokens when they were Initially issued these tokens were Themselves Securities yes you're are Okay we're not claiming that coinbase is Is the issuer are you arguing that They're a promoter in any Respect a a a a promoter of of the offer Or sale not in the traditional sense of What you would call Promotion no no not not in that context No I mean what's what's the third party That I care about here the howi speaks To it so what is the third is it the is It the actions of the issuers themselves The focus is going to be on the actions Of the issuer the and and the developer And the project team together at the end Of the day the the these 12 or or or 133 Tokens they're just computer code I'm so I'm I'm smiling sir because that's kind
Of what your friends at the back table Are saying and they're wondering why We're here so so okay yes and and I Promise you honor I will I will get you There so the SEC was having a little bit Of a difficulty just trying to explain What the reason was just FIA really was Kind of a position of not really having It and this next click clip it shows her Getting a little bit more frustrated With this so you can kind of set up and See how this is going for coinbase Listen in when a customer opens an Account on coinbase and wants to look at Different tokens to purchase and sees One of these 13 in particular as Examples they can click on it and they Can be linked right there to all of this Information including the value Proposition for these tokens based on What these issuers and project team Members are doing so the F okay but Please pause had they not done that Would you still believe these intermed Mediation services to bring them within The security laws and if so on what Basis yes the answer is yes but the Thing about terraform and the thing About Ripple we're not talking about the Issuer of the crypto asset we're talking About an entity that put it on their Platform that to me is a level Removed and that's the concern I have About how these entities should have
Known and your you or your colleague Saying strict liability doesn't make me Feel better about it so I'm just Confirming it at a at a minimum the Conduct was placing on the platform Stuff that you now tell me amounts to a Security yes the the short answer is yes Your honor let let me just clarify Though that the the the token itself is Is not the the the security I understand That right and that's what was it Mr Hinman or someone else who said that um Someone from your shop who's no longer There has said that so yes token alone Not a security so tell me What makes these the Securities when They buy this token they are investing Into the network behind it all right so She gets even more frustrated with this As they go further into what the SEC is Trying to say listen it I I'm trying to Figure out what about these Particular uh tokens allow you or to Make the argument that their purchase is Not just the purchase of an asset but The purchase into a system that Implicates the security flws you sure You're honor I I think the easiest Answer to that question is that that Transactions in these particular 13 Tokens satisfy the hoe test that's what Makes them security that's a little bit Circular to me sir what is it about the Issuance of these tokens what is it
About these tokens that brings them Within hoe and for you to say will they Satisfy hoe is not a helpful answer to Me what is it about them and please Don't say hoe what is it about them that You believe makes them Securities thank You man she just wasn't having it so This was still a good look for coinbase And I think this is a very pivotal point I think a lot of people don't realize What kind of implication this is going To have on the markets but more Importantly what this could have uh in Terms of implications on legislation Regulation and long-term Outlook of the Financial markets as a whole so coinbase Kind of came out looking pretty good Here there's a lot more to cover here I Want to go to this next clip which gets Into actually targeting some specific Tokens including Chili's and also xrp Going back to the win against X or the Loss against xrp listen in if we look at The the chili token for example they Launch the network and then they Continue to expand and add value to it How does that play out in in in real Practice well if you look at Chile the Original white paper and its website Feature biographies of The um the the founders in fact in one Tweet that they sent out it it's quote Demand for CHC Exploded going to bring a lot of value
And they also made efforts to to drive Secondary market trading by burning and And that's a term for you know creating Scarcity in the tokens to make them more Valuable and so this is where you're Disagreeing with judge Torres in the rip Of the Ripple case correct your Honor so already been proven and what She was talking about is torres's Findings on the Ripple case which is Established you know the situation with Xrp not being a security the other thing That they get into was Bitcoin and why It basically was in a position of Exception listen to what they had to say About that perhaps you've seen um tokens That that where there was no ecosystem Uh I I I I I believe that that the Commission has has taken the position That that the Bitcoin token is is not a Security there there's no ecosystem Behind it and I think that's the easiest Way to look at it even with these 13 I Don't know if I'm sensing your Honor's Next question or not but um I I doubt It by the acknowledgement the concession That Bitcoin is a commodity not a Security Bitcoin has every bit the Ecosystem of these other of these other Tokens Bitcoin is an ecosystem just like All of the others That won't do as a limiting Principle as The commission's own actions we think Make
Clear all right so actually that was the Coinbase attorney there on the other uh Side of that in terms of the position on Bitcoin and and their whole uh premise Of how this plays out and I think the Key here when you uh consider not only What the judge was trying to do was Really just figure out am i g to put a a You know a dismissal on this or are we Gonna have to go to trial because that's Really the the result uh there's a Couple of options here that could happen As well and I'm we're going to get Metal La man to kind of break this down on I Think tomorrow we'll do a video on that Because what this means for coinbase Coinbase stock and also for coinbase as A market leader and Market maker is Pretty critical uh to crypto I want to Go to this next clip because this goes Into the sec's staking defense which was Very weak listen in uh I found staking To be the the least investment the least Traditional investment like of the Functions that you were complaining About here so I'd like to understand What it is about that is what is it what Is it that coinbase does in the staking Context that brings them within the Ambit of the Security Plus what coinbase Is doing is taking an established Technology and building an Enterprise on Top of it investors are giving up their Cryto crypto assets to coin bases
Control they are pool and and then Coinbase is using its managerial efforts To manage the Enterprise which is the Coinbase staking program well I mean You're you're both fighting over what is Ministerial and what is managerial so One of the reasons I'm asking you what It is coinbase is doing is to figure out What it is you're upset about what it is You think they're doing yeah your honor That's a fair question I just want to Bring it back to making on your own is Complicated and costly they said Coinbase will do all of that for you That is an I mean absolutely what is the Staking conduct that coinbase does I Want it in gory detail what is it that They're doing that you believe brings Them within the Ambit of the security Laws um the validation needs to occur in A timely matter and that's where the Flashing risk comes into play coinbase Provides maximum server up time to allow For greater odds of success all right so There was another topic that they hit on That was a pretty big fail on the sec's Part and that was around the class Action issues around tokens listen to What they had to say let's say I agree With you my concern is does that mean That every every crypto asset purchaser Of those 12 or 13 Securities can if they Decide they don't like what's happened Bring some sort of fraud action what are
The limits are there limits are there Are there some guard rails in the Commission arguments because I am Concerned and several of the amiki have Suggested I should be concerned that What you're asking for is too broad a Definition of what constitutes a Security if you find for example that These are unregistered Securities I Would think that in the first instance The the asset purchasers would have a Right of recision am I mistaken about That they they they they would under Section 12 so okay so we you've conceded That that finding in your favor Potentially opens up the gates to uh Private actions it's not mer it's not Merely the commission who can bring Actions there there could be private Actions by the holders of the of the of The individual tokens if certain Circumstances were to happen or at least If they were to be alleged yes sir Okay all right so that was a big Statement and it was a big fail of the SEC around this could cause undue stress On courts all these kind of scenarios of What they're talking about the other Thing they got into was Collectibles and This one was really bad because the Judge actually I don't know I feel like The judge very smart she understands Completely what's happening in this Space so she's asking the right
Questions so listen to what she had to Say about this I want to understand how Your your standard that You' just Articulated to me does not sweep in Collectible markets or Commodities which Is my bigger issue we are not contending That collectibles are secure no one is Actually suggesting that you are we're All just afraid that you have so little Limitation on your standard that that Some really thoughtful attorney is going To bring the Beanie Baby class action Even now you could forear it right here That doesn't matter I care about how I Know that your test isn't going to Implicate either Collectibles or Commodities if you buy a a baseball card For example you're not buying into the Baseball card player Enterprise Collectibles have you know their own Their own value there there is no way For somebody to make a baseball card More valuable it just it it can't be Done in certain Collectibles I would Have thought that akin to the burning That one has in crypto assets um you can Have a limited edition figurine or you Could do something uh to to limit the Distribution of something and that would Increase its value I'm just wondering if There are Collectibles for which there Is uh a group of people who are working Together to ensure that there is a value Um you know it's almost you don't want
To dilute the brand as it were sure You're honor there there is that that Possibility yeah this gets into a really Slippery slope and I think the Judge Recognizes this and the overreach that The SEC is trying to do so they're Already off to a bad start this and I Think the the uh continuous argument That coinbase on Collectibles is being so weak is kind of Reiterated here in this next clip I am Advised that there is an apple plus Documentary about Beanie Babies uh that That make perfectly clear the the the Communities that grew up around that and It is true of all sorts of things that People buy and sell the buying into a Community it is it isn't absolutely Vacant limiting principle it's no Limiting principle at All all right so I've got three more Clips and you can see where this is Going you know around this so very the Judge very knowledgeable again very also In a position of making it I feel like Very easy for coinbase to present their Case they go a little further because Now we're talking about the regulation Impact on Capitol Hill so this is where Cynthia Lumis actually contacted the judge Listen in I recognize that I have a lane That I should be staying in there's a Lane that you all are in there's a lane
That Congress is in and I actually have Received a brief from a sitting United States Senator involved in this space Who says to me don't do this FAA I have to give that some difference Don't I I mean why why is she wrong I Think she's wrong respectfully to Senator Lumis because one senator's view Cannot Override that congress's will from 1934 okay but she's not just random Senator she's someone who is deeply Involved in the space and is herself a Co-sponsor of legislation to implement The Regulations or or to implement a Structure that she says is not found in The Hoy test and that doesn't cover this Specific group or type of of assets why Is she wrong and and respectfully Rightly by the way you guys can stop Saying respectfully because I I always Wonder what that means I always Interpret that is some insults so you Know some centio or insult so don't Worry so let's just go from there So take a step back the authority to Sort of overrule or repeal what a Congress duly enacted presented to the President for Signature in 1934 that That could create all sorts of issues But they're not saying they're Overruling or repealing it they're Saying that it's that we've had a great
Run we've had 90 years for which these Securities laws have been able to cover All manner of instruments and now we've Got something different um but I'm not Sure I don't know that this is necessary A repeal as much as it is a a filling of The Void as to a particular category of Instruments well if we we simply don't Agree that It's all right so the judge again kind Of uh dunking on the SEC around this From regulatory standpoint fact that the SEC just kind of said dismissed Senator Uh lamus was was interesting because I Think the point that the judge is making Is that Hey listen we have Senators that Are well versed in this they're going to Vote on this they're going to make a Regulation So eventually this is going To go away I might as well rule on this This is the last couple of Clips one of Them is going into the closing argument On um from coinbase and this is a really Strong closing AR argument this is a Good one to listen to so let's listen I Won't rehearse them all I will also Refrain from undo counterfactual Historiography as to the question of What the Congress congressmen and women Of 1933 and 34 would have thought about This but I'll tell you this I think There would have been a lot of surprise To find that an investment contract Didn't have anything to do with a
Contract at all and that is the position That's being sponsored here that the Very words of that statute are being all Lighted from erased from and completely In derogation with all the case law that Preceded it but slide 12 recounts about I don't know maybe a dozen and a half Statutory initiatives over the past two Years where Congress is trying to figure Out who crypto should be regulated by And how I think there an awful lot of Surprise historical and present about The willy-nilly arrogation of regulatory Authority that the SEC purports to to Assert by virtue of this action wish to Insist that there has been no showing of A necessary limiting principle the Commission's complaint draws the court Into truly unprecedented territory and If it's permitted to regulate here it's Permitted to regulate every everywhere And it could do so in after the fact Enforcement actions with or without Notice with or without warning and that Is not the way administrative law is Supposed to work and this is several Bridges too far and for that reason we Really urge the court to rant the motion Yeah so this was a very strong position And argument there by coinbase and they Hit it on all of the closing arguments Better than I think the SEC did the SEC Really struggled with this and I think a Lot of people anticipated that they
Already would but this really started to Close the door on the seccc now the Judge gives us her final argument here Or final closing remarks and there's Some interesting things that judge fais Said that I think could give us an idea That this is going to come to a Conclusion rather than going to an Actual Core case listen in earlier today My deputy said to me with some horror Are you going to decide this from the Bench and then it only prompted horror On my part because no I was clearly not Um I I had questions when I began this Day I have some answers and I have some Questions end the day so I I suppose I To thank you both and it is a measure of Everyone's uh preparation that um but I Can't decide this from the bench right Now so so take that as the compliment it Is all right so uh there you have it This is the wrapup uh basically my Assessment is coinbase clearly had the Upper hand and I think that judge faala Also understands what this means for Regulation what it means for markets and What it means for the future because This is going to end up being a lot more Just like what the coinbase is closing Arguments it's going to draw in a lot More situations from Court actions that Really the court just doesn't have time For under this overreach of the SEC if You look at coinbase's stock we'll go
Back here to December now this is December 28th when it hit that alltime High at 186 this is all leading up to The ETF but you look at it coinbase has Been on a little bit of a slide now so Really trading around 12 4 and even Yesterday had a little bit of a closing Around 130 132 point being is this has Not have a big effect on coinbase now if You look at it from a standpoint of is Coinbase may be in a position where this Could bounce and be beneficial if in Fact we get a dismissal if a dismissal Comes in from the judge coinbase and I Think what we will see on a lot of these Tokens which we'll break down for you Guys in another video are really going To start to respond so keep an eye on That we'll try to keep you updated on All that good stuff and of course like I Said we'll have um met a law man giving Us his opinion this is an attorney's Opinion who was there uh where he thinks This could be uh going next so it's Going to be a good one uh make sure and Tune in for that if you're not part of The diamond Circle get in right now it's Free content we do additional podcast And research over there it's very easy Just click the link down below follow me On X Paul Baron we'll catch you next Time right here on Tech Bath
