Coinbase Stocks Rallies 30%+ off Ripple’s SEC Win — But Some Analysts Aren’t Convinced

Key Takeaways

• Ripple Labs has won a court case, confirming that it’s sales of XRP were not regulated securities sales
• Coinbase stock has surged on the news at it’s battling a similar issue with the SEC
• Some analysts aren’t convinced that the XRP win necessarily means the Coinbase are out of the woods

In recent month the US financial markets regulator, the Securities and Exchange Commission (SEC) has filed suit against a number of high profile crypto exchanges, such as Coinbase and Binance, with accusations that they have been operating as an unregulated securities exchange. There is a key difference between the trading of stocks, bonds and ETFs, which are strictly regulated by the SEC, and cryptocurrencies, which are entirely unregulated.

For now.

But just this week, Ripple Labs claimed a partial win in their own suit against the SEC, with a judge ruling that some of their crypto transactions do not meet the technical definition of ‘securities sales.’

Given that the arguments being made are similar to those levied at Coinbase, the stock has jumped. But is it justified?

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How has the Coinbase stock reacted?

Coinbase stock has had a cracking start to the year. It’s up over 216% so far in 2023, and this news has sent it up a further 31% over the past five days. It’s in line with the low key (in terms of media coverage) rally that’s been happening across crypto this year.

Coinbase is one of the few crypto exchanges listed on the public markets, but coins and tokens have grown strongly so far this year. Bitcoin itself is up 68%, Ethereum is up 47% and Ripple (XRP) who’s behind the recent SEC win saw their token jump and is now up over 100% in 2023.

Is the Coinbase rally the real deal?

Judge Analisa Torres’ ruling takes the crypto companies side by stating that the digital assets sold by Ripple are unregistered securities, meaning that they do not need be regulated in the same way stocks on the public markets are.

Analyst Mark Palmer from Berenberg pointed to a footnote on the decision which provided some further detail on where a specific transaction of a digital currency would count as a registered securities translation.

It read, “(It) depends on the totality of circumstances and the economic reality of that specific contract, transaction or scheme.”

So to put it simply, just because Ripple is off the hook from selling its own XRP tokens, doesn’t mean that Coinbase or Binance are automatically in the clear.

The bottom line

Crypto continues to test the boundaries, and these lawsuits are important steps in the maturation of the industry. Case law and precedents will allow companies in the space to have a clearer view of what they can and can’t do, which will reduce risk for investors over the long term.

In the meantime, crypto remains a risky place to park your cash, which is why a diversified approach is always the best way to go.

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