Today’s hearing on the SEC’s landmark case against Coinbase led many in the crypto community to believe that the company, and by extension, the digital asset industry, has the upper hand.

Coinbase was looking for the court to dismiss the SEC’s suit, which alleged that the company was operating an unregistered exchange, brokerage and clearing house. The suit also accused Coinbase of failing to register its staking-as-a-service product.

Judge Katherine Polk Failla, who threw out a class action lawsuit against the Uniswap team in August, has yet to decide on whether to dismiss some or all of the SEC’s case. Orlando Cosme, a lawyer advising many projects in the crypto space, told The Defiant that he anticipates that ruling to come in between the next month to four months.

“My top level take is that Judge Failla exposed that the emperor (Chair Gensler) has no clothes,” Cosme told The Defiant. “Her obvious conclusion, as is the conclusion of any lawyer who has dealt with crypto and securities laws seriously —and contrary to Chair Gensler and the SEC’s message— is that the securities laws absolutely are not clear as applied to crypto.”

The SEC’s suit against Coinbase stands to be potentially the most influential case in crypto’s history — Coinbase is the largest public crypto company in the U.S., and the SEC’s allegations cut to the heart of what constitutes a security, a key question which stands to impact every project that issues digital assets.

Markets soared last year when the SEC lost major parts of a case against Ripple Labs Inc. when Judge Analisa Torres ruled that the XRP token is not inherently an investment contract and, therefore, not necessarily a security.

The outcome of the Coinbase case is likely to cause even more dramatic market swings as well as long-term recalibrations in the industry.

The SEC specifically named digital assets like SOL, MATIC, and ADA as securities. The named tokens command well over $60B in market capitalization.

While some in DeFi were ready to break out the champagne for an imminent Coinbase win, Cosme urges caution, saying that judges sometimes appear to side with one party during oral arguments only to rule differently after the fact.

A Step Forward

A spokesperson from the DeFi Education Fund (DEF), a DeFi-focused research and advocacy group, told The Defiant the hearing was “a step forward.”

Judge Failla called the group’s amicus brief, which the DEF filed in August, “really fine” for explaining what crypto wallets and staking really are. “That actually, in some respects, makes more sense to me than the [SEC’s] description of it in the complaint,” Failla said.

“On wallets and staking, the court rightly noted the paucity of factual allegations in the SEC’s complaint, and we were happy to hear that our amicus brief on these issues was useful in the court’s understanding of them,” the spokesperson said.

The Case to Come

Looking forward, Cosme thinks the judge is most likely to dismiss the charge that Coinbase’s staking-as-a-service offering constitutes a security.

He sees a more broad positive outcome too, however. “The biggest takeaway is that courts are willing to disagree with the SEC’s position and challenge them, thus showing that the securities laws as applied to crypto are anything but clear,” he said.