SEC vs. COIN: Impacts to the Cryptocurrency Landscape

One of the most significant dilemmas captivating the attention of the investment management community today is the Securities and Exchange Commission (SEC) vs. Coinbase (COIN) lawsuit. 

This past June, the SEC sued COIN, a U.S.-based cryptocurrency exchange platform, for failing to register as a securities exchange with the markets regulator. The Howey Test, an important tool for evaluating blockchain and digital currency projects by determining whether or not a transaction is an “investment contract,” serves as a guide in the decision-making process for this trial. 

While COIN and the SEC have disputed over having the case dismissed, it ultimately comes down to the court’s interpretation of who is in the right based on the Howey Test standards. The outcome of this lawsuit will redefine the cryptocurrency landscape in the U.S.

Investment management professionals and cryptocurrency enthusiasts alike are seeking the most accurate and truthful information as they track this case. To provide further insight, we connected with Andrew Walker, Portfolio Manager at Rangeley Capital, a Connecticut-based investment management firm, to understand his perspective on the case as well as how AlphaSense’s Expert Insights’ personalized 1:1 expert calls have provided deeper perspectives on the legal ramifications surrounding the case.

Using Expert Insights to Track the Case

AlphaSense: You recently hosted a podcast episode in which you spoke with Daniel Payne, Senior Fellow at the International Congress of Blockchain Legal Advisors, about the SEC’s case against COIN from July this year. Could you shed light on its significance?

Andrew: I was really glad AlphaSense’s Expert Insights team sourced Daniel for this podcast, as finding an expert with his background and niche experience is not easy.  What I discovered is that COIN is one of the classic “battleground” stocks. COIN bulls think that the best is yet to come for COIN, and that COIN’s decision to focus on the U.S. markets and getting in front of a host of regulations puts them in the driver’s seat to dominate the U.S. market and drive huge volumes (and profits) when the “crypto” winter concludes. Bears see a business that violates a host of regulations while also seeing immense competitive pressure if and when the regulatory landscape clears up.

The SEC lawsuit was yet another marker of just how divided the two camps are. Bears saw a lawsuit that could instantly kill COIN if they lost; bulls saw an opportunity for COIN to legitimize their business and put regulatory fears firmly behind them.

I’m not a lawyer, but I’m fascinated by all aspects of both sides of the COIN bull and bear case, so I wanted to do the expert call to better understand the legal angles.

AlphaSense: How does the SEC’s argument regarding COIN’s internal Howey Test influence the decision to allow various tokens to trade on their platform?

Andrew: I recently did a separate expert call on the SAVE / JBLU merger with a lawyer who was familiar with antitrust, and one of the key things the lawyer kept telling me was how critical “hot docs” were to a legal case. To me, the COIN internal Howey Test has the feel of “hot docs”: COIN had rules regarding letting coins onto their platform that would fail the Howey Test, and they continued to loosen those rules up and allow riskier coins on their bid to grow the business and take market share. It suggests to me COIN knew they were running on the edge of regulation and didn’t care.

AlphaSense: Considering this legal case may take years to resolve, how do you anticipate its lasting implications will shape the U.S. crypto industry, and what potential paths lie ahead for COIN?

Andrew: In the near term, the case is going to have a chilling effect: major brokerages are not going to be willing to offer crypto services in the U.S. when the SEC so clearly thinks they should be regulated securities. Once the case resolves, I think we’ll get much more clarity. If COIN wins, I’d expect a flood of competition as the major brokerages begin to offer crypto as a way to grow and reach younger “investors”; if COIN loses, I’d expect crypto to largely exit the U.S. and COIN would likely face distress as they are hit with a mountain of fines and lawsuits.

AlphaSense: Why would you recommend AlphaSense to institutional investors to conduct their fundamental research?

Andrew: I come from a private equity and consulting background, so I can attest to the value that firms place on expert calls to guide their research. The right expert call can drive a unique insight that’s potentially worth a fortune. One of the greatest fears for public market investors is being the “patsy at the table.” This often happens when one invests in an opportunity that appears promising to a generalist but that has underlying flaws that any industry insider could easily pinpoint. 

Expert interviews can help alleviate these risks or generate the unique insights that really make an investment “click.” For me, this is where AlphaSense’s deep library of over 40,000 expert calls comes in. With the help of its Generative AI-driven Smart Summaries functionality, I’m able to swiftly grasp expert insights through SWOT and competitive landscape analysis driven from expert transcripts. 

If you’re like me and always seeking to delve deeper into topics, you’ll absolutely love AlphaSense’s personalized expert calls. I’ve had the chance to connect with seasoned professionals for a flat rate of just $400 per call. It’s astounding because when you compare it to traditional expert networks, you’re looking at a whopping 70% in cost savings. It’s not just about the savings, though; the insights and expertise I’ve gained around the SEC vs. COIN lawsuit are invaluable.”

Looking Ahead

The outcome of the SEC vs. COIN lawsuit still remains unclear, with each side working to gain support from state regulators and other governing parties. What is clear, however, is that this case will significantly impact the crypto industry regardless of the outcome. If tracking and accessing critical SEC developments and real-time, accurate insights is crucial to you, AlphaSense’s Expert Insights is the perfect, cost-effective solution.

Expert Insights gives you the option of scheduling your own calls via the “Talk to This Expert” feature within the platform or hiring experienced analysts at AlphaSense to conduct brokered calls on your behalf. With Expert Insights, you can gain a comprehensive understanding of a company to make well-informed investment decisions by asking experts curated questions and extracting personalized insights. 

Below is a summary of what’s included in AlphaSense’s Expert Insights package:

• Expert transcript library – annual subscription model

• • Over 40,000 + total transcripts
  • Thousands of transcripts added per month
  • Buy-side analysts interviewing industry experts

• Expert Call Services – priced per call / bundles of calls (must be a subscriber)
  • Follow-up calls with any expert in the library 
  • Personalized 1:1 calls, where we locate the expert you want to interview 

Schedule your next expert call interview today with AlphaSense.