Coinbase (COIN), one of the leading cryptocurrency exchanges, experienced a remarkable 6% surge in its stock price this week, driven by growing optimism regarding the potential approval of a long-awaited bitcoin spot exchange-traded fund (ETF).
Coinbase’s stock performance has often closely mirrored the broader cryptocurrency markets. As one of the largest crypto custodians, the company has garnered significant attention from various prospective ETFs, including BlackRock’s proposed Bitcoin ETF.
This recent positive turn makes Coinbase an attractive investment option, especially with the potential of an impending bull market and the upcoming Bitcoin halving. The current price increase could mark a significant turning point for the company, which has been embroiled in a legal battle with the US Securities and Exchange Commission (SEC).
Coinbase’s legal challenge with the SEC
The SEC’s regulatory approach has been a subject of criticism, both from the cryptocurrency industry and Congressional voices. Hester Peirce, SEC commissioner, says in an interview with Andrew Sorkin that “the agency has not been very good when it comes to Bitcoin or crypto other crypto assists. And everyday I hope that they will wake up and take more productive approach”
Critics argue that the SEC is overly punitive and targets cryptocurrency exchanges, a stance that has been reinforced following the FTX collapse. However, certain cryptocurrencies should indeed be classified as securities, emphasizing that additional regulation is necessary to solidify the SEC’s jurisdiction.
This ongoing jurisdictional battle has cast a shadow on the share prices of companies with exposure to cryptocurrencies. Despite its almost 110% year-to-date gain, Coinbase remains below its pre-crypto-winter levels.
In response to the SEC’s lawsuit, Coinbase is preparing its final motion to appeal. In August, the company moved to dismiss the SEC’s claims, asserting that the lawsuit exceeded the SEC’s authority and that the assets in question did not meet the criteria for securities under the Howey Test.
The SEC, however, maintained its position that Coinbase did indeed facilitate transactions involving investment contracts. Coinbase is set to submit its response in federal court by the end of Tuesday, adding another chapter to its ongoing legal battle with the SEC.
If Coinbase prevails in this legal battle, it could potentially have a positive impact on the company’s stock price, providing a boost to investor confidence and potentially leading to favorable market sentiment.
The resolution of this lawsuit may alleviate some of the uncertainties and regulatory pressures that have surrounded Coinbase, allowing it to focus more on its core business and growth opportunities. However, the outcome remains uncertain, and investors should be closely watching for developments in this case.