Thomas Daniels
Analysts at H.C. Wainwright & Co. characterize Coinbase’s (NASDAQ: COIN) February 21 announcement that the U.S. Securities and Exchange Commission (SEC) is likely to drop its lawsuit against the cryptocurrency exchange as a “major win” for the company and the larger cryptocurrency market.
According to a report by analyst Mike Colonnese, Coinbase’s management expects a resolution as early as next week, even if the SEC commissioners’ final approval is still pending.
SEC Rethinks Crypto Enforcement in a Regulatory Shift
Coinbase was accused by the SEC in its June 2023 complaint of operating unlawfully as an exchange, broker, and clearing agency and of offering unregistered crypto asset securities. A dismissal would indicate a possible change in the SEC’s position toward a more accommodating regulatory environment for the cryptocurrency industry in addition to removing a significant regulatory burden on Coinbase’s shares.
Expanding Businesses and Cutting Legal Expenses
In their analysis, analysts Mike Colonnese and Dylan Scales stated, “This announcement removes a major regulatory cloud over Coinbase’s shares.” They believe the ruling will result in a considerable reduction in legal costs and new prospects for expansion, especially in the areas of bitcoin listings and staking services.
The analysts predicted that Coinbase’s staking business, which has been limited since the SEC’s enforcement action, would eventually grow as a result of the dismissal. They also anticipate that the number of new cryptocurrency listings on the site will increase more quickly, which could increase both subscription-based and transaction-based revenue.
Market Impact and Stock Reaction
Coinbase shares witnessed modest initial gains despite the good news, opening Friday at 1% higher. However, the price fell sharply, finishing at $235.37, down 8.2%, as investor confidence was shaken by the wider crypto market’s reaction to news of a significant attack at Bybit.
