He said the society's case was that the goldfish was alive although both defendants maintained it was dead.
Mr Withey said: "The fish is clearly alive and can be seen moving.
"The bouncer who would have been in many more scary situations had rocky steady hands. It was the fish that was moving.
"It is a sentient animal and it would have felt pain. It was a bravado exercise - like the necknomination craze.
"The clip was put on Facebook because the fish was alive when swallowed. Fish are protected under the 2006 Animal Welfare Act."
Under the 2006 Act, the penalty for causing unnecessary suffering is a fine of £20,000 or six months or both.
The magistrates were shown the 35 second video several times.
It shows Challis picking up the wriggling goldfish - which was owned by his friend - and he holds it above his mouth and swallows it as people in the room laugh out loud.
Challis pulls a face as he swallows the fish he had held by its tail and then drinks something else to wash down the tiny fish.
Challis said he was '"tipsy"after drinking five pints of lager and that may have affected his judgement on that night.
Former security worker Challis, of Torquay, Devon, denied causing unnecessary suffering to the fish, as did Stevens, of Paignton, who admitted she videoed and posted the footage.
Challis said in a formal RSPCA interview: "It was a stupid thing to do. I didn't think eating a fish could cause this much trouble. It upset some people."
He said it was "the one and only time" he had eaten a goldfish.
He said it was a "dare" but when he saw it on social media, he asked for it to be taken down.
Independent vet David Martin said a dead fish sinks to the bottom before gases make it float on its side at the top.
He said this fish was moving in the middle of the glass and said it would have suffered as it tried to breathe out of the water.
He said ingesting a live fish would also cause it suffering because it would be unable to breathe in an acidic environment like a human stomach.
Challis, now a timber merchant, claimed the fish was dead and was not wriggling - saying it was his hand shaking as it held it up.
Stevens, 27, said: "Someone dared Dan to down it. I took the video, I posted it on Facebook. It was dead - he was shaking, he was nervous. I never filmed anything like this before."
Neither said they realised a goldfish is protected under law.
Challis said: "It was dead. I flinched because it was slimy and not pleasant. I had a drink and my hand wasn't steady at the time."
He told the court he could not remember who had asked him to carry out the dare.
Neither defendant could remember who else was in the room, who made the dare and who took the fish out its tank and put it into the glass before it was swallowed.
Stevens said of the incident: "I thought it was quite funny."
The JPs said the video evidence showed the fish was alive.
Sentencing has been adjourned until next month and both defendants were bailed.
