1/ My takes on the recent order in SEC v. Coinbase 👇

#1 - HUGE win for DeFi. The court dismissed the SEC's claim alleging Coinbase Wallet functions as an unregistered broker. Drastic SEC overreach. This is great for devs and those working on peer-to-peer tech.

🧵

Head of Legal @ Blockchain Association. Casts not legal advice. 

Author of @ The Undefined on Substack. 

2/ The court allowed the SEC's remaining claims to move forward. Not great, but now Coinbase gets to conduct discovery. Major battles will be fought and the true facts will be taken into account at summary judgment.

3/ Remember that at this stage, the court MUST take the facts alleged by the SEC as true. The courts hands are tied. 

The case will proceed to discovery and the parties will have an opportunity to fully argue the case on summary judgment based on ALL relevant facts.

4/ For instance, at later stages, the court will be able to grapple with facts related to decentralization, whether "efforts of others" includes token holders themselves, and how token utility factors into the analysis. At this stage, there's no focus on any of this.

6/ This isn't right. If it were, many collectibles would be securities - Barbie has an ecosystem tied to the value of the brand, but the dolls themselves are not securities. Pokemon too. Rolex also.

7/ Another example: Lakers tickets. If you're a season ticket holder, you can sell your tickets on a designated exchange. As a season ticket holder, you buy into the team's ecosystem, relying on efforts to keep ticket value up. But the tickets aren't investment contracts, right?

8/ The court also focuses almost entirely on facts related to how token projects initially launched their tokens. Remember that the court must take these facts as true. Additional facts will come out in discovery that will undoubtedly support Coinbase's strong arguments.

9/ Keep in mind that it is extremely rare for dismissal motions like this one to be granted in full - especially against the government. The win on Coinbase Wallet is a big deal and should not be overshadowed by the remaining claims moving forward.

10/ Although the SEC has already attempted to use this opinion as favorable precedent in the Binance case, and they will continue to do so in other ongoing cases, I'm hopeful that courts will refuse to give the opinion too much weight given that no discovery has taken place.

11/ All in all, I am optimistic. The @coinbase team is composed of some of the best lawyers in the world and their arguments are strong. 

Full opinion here: https://storage.courtlistener.com/recap/gov.uscourts.nysd.599908/gov.uscourts.nysd.599908.105.0.pdf

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5/ Regarding the analysis of Howey, the court adopts the SEC's definition of "ecosystem" and makes a giant leap to reason that tokens are investment contracts because purchasers are buying into the token's ecosystem, which is tied to its value.