Coinbase Global Inc., a leading cryptocurrency exchange, is anxiously awaiting its own regulatory outcome. As investors closely monitor the legal battles of other cryptocurrency-related companies, they are searching for signs of what lies ahead for Coinbase.
Coinbase’s stock, represented by the ticker symbol COIN, has been performing remarkably well this year, witnessing a staggering 167% increase. In mid-July, it experienced a significant surge following a federal judge’s ruling that Ripple Labs’ token was not a security in retail sales on crypto exchanges. Although unrelated to Coinbase’s ongoing litigation, investors perceived this decision as a potentially positive indication for the exchange.
However, recent developments in another crypto case involving Terraform have dampened the market sentiment towards Coinbase. The judge presiding over the Terraform case expressed a more stringent interpretation of the matter than in the Ripple case. Consequently, Coinbase’s stock has declined by 4% on Tuesday.
The judge’s ruling in the Ripple case was centered on the concept that retail buyers participating in Ripple’s programmatic on-exchange sales were unaware that their funds were directly benefiting the company. This lack of knowledge meant that they were not investing in a common enterprise. Moreover, while buyers had hoped to profit from their investment in XRP (Ripple Labs’ cryptocurrency token), they did not base this expectation on Ripple’s efforts, according to Barclays analyst Benjamin Budish.
As Coinbase navigates its legal battle against the Securities and Exchange Commission (SEC), which accuses the company of operating an unregistered national securities exchange, these contrasting rulings provide valuable insights and serve as a litmus test for Coinbase’s own case.
Terraform Case Challenges Ripple Ruling
In a recent development, the judge overseeing the Terraform case has taken a different stance compared to the judge in the Ripple case. While the judge in the Ripple case drew a clear line between sales on crypto exchanges to the general public and sales to institutional investors, the Terraform judge saw no such distinction. This difference in interpretation may have significant implications for Coinbase’s lawsuit.
According to Budish, an expert in the field, this ruling sets a regulatory precedent that could impact Coinbase’s case. However, it is important to note that the outcome of Coinbase’s lawsuit still remains uncertain, with a wide range of possibilities.
Berenberg Capital Markets analyst Mark Palmer views the Terraform developments as a rejection of the Ripple ruling, which could complicate Coinbase’s use of that ruling in their own defense.