Coinbase Rally on the Back of XRP Court Ruling Is Overdone: Berenberg

The surge in the crypto exchange’s share price was driven largely by investors who saw the decision as a representing a rejection of the SEC’s argument in the lawsuit it filed against Coinbase in June, the report said.

AccessTimeIconJul 14, 2023 at 7:44 a.m. UTC

Coinbase (COIN) shares rose over 24% Thursday after the U.S. District Court dismissed part of the Securities and Exchange Commission’s (SEC) case against Ripple Labs and ruled that the company’s XRP token is not a security, however, the extent of the rally may not be warranted, investment bank Berenberg said in a research report.

“The surge was driven in large part by investors who interpreted Judge Torres’ ruling as representing a rejection of the SEC’s argument in the lawsuit it filed against COIN on June 6 that many of the tokens bought and sold in secondary-market transactions on the company’s exchange are unregistered securities,” analysts led by Mark Palmer wrote.

A closer reading of the court’s ruling shows that the judge specifically did not reject that argument, the report said.

The SEC said it was suing the Nasdaq-listed crypto exchange on allegations of violating federal securities law. According to the regulator, Coinbase has operated as an unregistered broker, exchange and clearing agency simultaneously. It solicited customers, handled orders, allowed for bids and acted as an intermediary all at once, the SEC said.

The judge’s ruling “pertained solely to the primary market transactions through which Ripple sold XRP, while COIN is in the business of facilitating secondary-market transactions on its exchange,” the analysts wrote.

Berenberg says the judge’s decision that XRP on a standalone basis is not a security is “immaterial in the context of COIN since she also acknowledges that the sale of XRP can in fact represent a securities transaction.”

The German investment bank has a hold rating on Coinbase shares and a price target of $39. The stock closed yesterday at $107.

Edited by Sheldon Reback.


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Author placeholder image

Will Canny is CoinDesk's finance reporter.

Read more about