The first hearing of the case filed by the United States Securities and Exchange Commission SEC against Coinbase was held. However, this should not be called a trial. In fact, the judge listens to the parties at the preliminary hearing, where the judge decides whether the trial will continue or not, and does his own research and decides whether this case should continue. Is more research needed? Or it decides whether the case should be dropped. It is estimated that the decision will be made within 2 to 6 weeks. I both read the comments about the hearing and listened to part of the hearing. I found that Katherine Polk Failla, the New York district judge who presided over the case, was really well prepared. She understood crypto very well, she understood the altcoin issue very well, she understood well what the American Securities and Exchange Commission was trying to do and the defense of Coinbase. She asked very neutral but very strong questions, and thus she actually revealed a little bit of how the case would go.

So, let's start from there, what is the subject of the case? The American Securities and Exchange Commission says that Coinbase allows 10 sub-coins, including very large ones such as Cardano, Chiliz, Solana, to be bought and sold on its market. Moreover, it also pays staking, that is, interest, to them. He says this is against the law. Because these are securities. Since they are securities, they fall within my jurisdiction. He cannot buy or sell them without my permission or approval. He says this is against the law. Coinbase's defense against this is that these are digital assets, digital assets do not fall within the jurisdiction of the American Securities and Exchange Commission. This requires new laws and rules. These laws and rules either come from the Congress or the Capital Markets Board should have defined them in advance and given them to us. Since there is neither, we demand that the Capital Markets Board's case on this issue be dismissed. He says there is no such ruling power.

So why does the US Securities and Exchange Commission claim that these are securities? In fact, he has a sample case, and the Howey Test is mentioned in that sample case. The Howey Test is a method, a tool that was once decided upon by the Capital Markets Board when discussing whether something is a security or not, and this test says that there must be a contract and with this contract we must be able to invest a certain amount of money in a public enterprise or an asset. We should expect a profit from here, and this profit expectation should be based on the efforts and work of others. We can talk about a stock as an example in the Howey Test. A stock is essentially a contract. That contract gives you certain rights such as attending the company's general assembly, receiving a share of its dividends, and voting rights. You will see how much money that stock can earn in case of bankruptcy. These are contracts. This is a monetary investment. You are doing it for a public company and you expect a profit, of course, and where will this profit come from? The cash and profit generated from the work of those company managers returns to you as profit per share. When we look at it this way, the stock literally fits the Howey Test.

So, do altcoins fit here? This is where the debate arises. I think Coinbase has a pretty strong defense here. He says there is no contract on altcoins. Really not. So, when you buy altcoins, for example, when you buy Solana, you do not participate in the management of the Solana company. There is no contract. There is no promise made to you. You only buy it because you believe that it will increase in value in the future, just like a collector's item. Coinbase says that if the Capital Markets Board is interfering with this, then it should also interfere with people's watch collections. It should also be included in the baseball card collection, which is very popular in America. This is his duty, it goes beyond his purpose. Because there is no contract. This is their first argument. Their second argument is that this is a second-hand trade, that is, Solana does not sell its altcoins directly. Someone bought it at the time and it is seen in the second-hand trade here. Again, this goes beyond the control area of the Capital Markets Board. Because here there is no situation suitable for the Howey Test similar to the original institution marketing its own shares. People buy and sell it second hand. In this case, the American Securities and Exchange Commission should not interfere in this matter. These are the claims of the parties.

The judge asked excellent questions. One of the questions is, does someone who buys altcoins have the right to withdraw? Isn't it so, when you sign a contract, you have the right to withdraw from the contract under certain conditions. No, there is no right of withdrawal here. The Capital Markets Board directly accepted this. In this case, said the judge, this is not actually a contract. It doesn't have anything like a contract. If not a contract, he doesn't pass the Howey Test. The judge persistently asked the Capital Markets Board to define what a security is. They always used the Howey Test as an example. The judge also says, but basically you are saying there should be a contract, he says in the Howey Test it is not here.

The judge immediately came to the second part of his questions. In this context, what is the difference between this and a collector's item, referring to altcoins? He said, "Just like people collecting watches or stamps is outside your control, isn't this also outside your jurisdiction?" and he emphasized a very important doctrine there. The name of the doctrine is major questions Doctrine. Roughly, the idea is this: No institution in the United States can make decisions when the main task lies with Congress. So the judge is saying that there is a special situation here. This is not within your jurisdiction regarding this matter. This needs to be decided in the congress, which some congress members said. You are already trying to step into their shoes and decide. How does this work?

The judge's second objection says, "Then go and file a lawsuit against Solana." In other words, actually file a lawsuit against the institution that you claim put that asset, that security, on the market. Why are you filing a lawsuit against coinbase? Coinbase is just a marketplace where this is bought and sold. This is really interesting. Frankly, the members of the Capital Markets Board could not give a proper answer on this issue.

Another question from the judge was this. Have you made a request to this effect from the Capital Markets Board? So, have you tried to understand what kind of regulation you will be subject to? Coinbase also said, yes, we applied many times, but they did not give us an answer. Because the Capital Markets Board says this is a security. I don't need a new ruling or a new regulation. What is happening already prohibits this. Judge, I'm not so sure about that. There is a new digital asset class here. Maybe a new law should be passed regarding this. You cannot replace the law. He said, "You should step back where the new law is necessary." Yes, this is the case. To summarize, the Capital Markets Board says, "These are subject to the Howey Test. There is an error here. These are securities." Coinbase also says, "No, there is no contract here. We are already trading second-hand here. These are like collector's items. That's why they are out of your control. Moreover, we came to you and asked, we said give regulation. You did not give the regulation, in this case, you are interfering in the decision that the congress should make." .What you're doing is wrong."

Now my impression is that the judge did his homework quite well, what is decentralized finance? What are altcoins? What is the Howey Test? These work very well. I also have another feeling. It seems as if the judge has already made his decision and the decision will be in favor of coinbase. So it seems like the case will be dropped, but of course political balances may come into play here. After all, I am not an expert on American law. I don't know how the judges decide. Maybe he might say that a lawsuit should be filed because of this. Why, because he wants to take responsibility from himself and reveal all the details about this issue. But if you ask me, there are no more details to talk about. Because if there's a contract involved, Howey is in Test. There is no contract here, the matter is over. Therefore, the American Congress must pass new laws.

It is expected that the judge will decide the case within 2 to 6 weeks. If this ends positively, this would be very beneficial for altcoins. It would also be useful for Coinbase. Why would it be useful for coinbase? Because Coinbase earns a lot of commission from the buying and selling of these altcoins. There is also staking income. Remember, Coinbase is in a very strong place politically right now. Because almost all of America's major bitcoin etfs store their crypto in coinbase. There are also powerful giants like Black Rock behind it. So I'm completely confident that the SEC will lose the case in the long run. But it is difficult to know whether the judge will extend the case or not. Hopefully we will have the results in a few weeks. I wanted to roughly summarize the situation like this. I hope it was useful.

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