Lawyer James Murphy explained in a series of tweets Wednesday why he believes the U.S. Securities and Exchange Commission (SEC) will lose if it takes Coinbase to court. 

The lawyer opined:

If the SEC follows through on its threat to sue Coinbase, I believe the SEC will lose. The SEC’s case has a fatal flawCoinbase's revenue on deposits via interest income, blockchain rewards, and custodial fees made up the majority of its revenues. And the problem is entirely of Gary Gensler’s own making.

Murphy explained that SEC Chairman Gensler himself said in his testimony to Congress on May 6, 2021, that the SEC does not have the authority to regulate cryptocurrency exchanges. Gensler’s testimony followed his confirmation by the U.S. Senate on April 14, 2021, to serve as chair of the SEC. He was sworn into office on April 17, 2021.

If the SEC files a lawsuit against Coinbase, the crypto exchange’s legal team “will surely zero in on the communications within the SEC leading up to Gensler’s May 6, 2021 testimony,” Murphy said, adding that “All testimony of an SEC Chairman is thoroughly vetted internally before they testify.”