Shares of the crypto exchange, Coinbase (COIN), dramatically increased by more than 24% at the end of the last week, following the recent judgement from a U.S. District Court dismissing part of a case presented by the Securities and Exchange Commission (SEC) against Ripple Labs. The court ruled in the favour of Ripple stating that their XRP token does not classify as a security.
However, according to a research report from the investment bank Berenberg the surge in the cryptocurrency exchange’s stocks might have been an overreaction. Berenberg’s research suggests that investors might have interpreted the ruling as a comprehensive repudiation of the SEC’s argument in their June 6 lawsuit against Coinbase. The SEC’s protest was primarily about the unregistered status of many tokens bought and sold on Coinbase’s platform, linking those transactions to a violation of federal securities law.
In contrast to this perception, Berenberg affirms that if one scrutinizes closely, the court’s ruling didn’t actually dispute this part of the SEC’s argument. The German investment bank drew attention to the fact that the judge’s ruling exclusively related to Ripple’s primary market transactions of selling XRP.
While ignoring the secondary market transactions on Coinbase’s trading platform, the SEC accuses Coinbase of operating as an unregistered broker, exchange, and clearing agency all at the same time. They contend that Coinbase was engaged in soliciting customers, processing orders, permitting bids and played the role of an intermediary.
This contradicts some investor interpretation of the court proceedings, that also contributed to Coinbase’s robust share performance. Berenberg’s analysts emphasized that the judge’s decision on XRP being a non-security entity, is technically irrelevant in the context of the crypto exchange. They recollect that the judge also acknowledged, sales of XRP could indeed take the form of securities transactions.
Considering the current scenario, Berenberg keeps a cautious approach, maintaining their hold rating on the Coinbase shares with a price target of $39, notably lower than the recent close of $107 last week. It appears that the verdict delivered a mix of light – casting both shadows and sunshine on the Crypto exchange. It remains to be seen how Coinbase will maneuver in this fluctuating climate of regulations.
Source: Coindesk
