Coinbase set to win SEC dismissal in ‘major win,’ analyst says

Coinbase announced on Feb. 21 that the U.S. Securities and Exchange Commision is set to dismiss its June 2023 lawsuit against the crypto exchange, a move that analysts at H.C. Wainwright & Co. call a “major win” for the company and broader crypto industry.

While final approval from SEC commissions remains pending, Coinbase’s management is hopeful the case would be cleared as early as next week, analyst Mike Colonnese said in a report. 

The SEC’s lawsuit alleged Coinbase offered unregistered crypto asset securities and operated illegally as an exchange, broker, and clearing company. But, expectations for a dismissal would negate an ongoing headwind on Coinbase’s stock and provide a clear signal the SEC is shifting stance towards a more crypto-friendly stance.

Regulatory overhang lifted, business expansion expected

“Today’s announcement lifts a major regulatory overhang on shares,” analysts Mike Colonnese and Dylan Scales wrote in their report. They also expect the decision to significantly reduce costly legal fees and open doors for business expansion, particularly in staking and crypto listings.

“We would also expect the dismissal of Coinbase’s case to eventually lead to an expansion of the company’s staking business, which had been constrained since the enforcement action was issued,” the analysts noted. “We also see the potential for an acceleration of new crypto listings on Coinbase’s platform, which would benefit subscription and services revenues and transaction revenues, respectively.”

Coinbase’s stock opened around 1% higher Friday morning in a muted move as the analyst expected “a more positive reaction” from the news. But, Coinbase’s stock quickly moved into the red as news of a major hack at Bybit spooked the entire crypto industry.

Coinbase’s stock closed on Friday at $235.37, down 8.2%.