SEC Lawsuit Against Binance May Signal Impending Action for Coinbase, Analyst Suggests

The U.S. Securities and Exchange Commission’s (SEC) lawsuit against Binance has come to the notice of Berenberg analyst Mark Palmer, who believes it may be a sign of things to come for Coinbase, a rival cryptocurrency exchange. Palmer’s note draws attention to the parallels between the SEC’s moves against Binance, Bittrex, and Kraken and muses about what might happen to Coinbase. The implications for Coinbase are examined in this article along with Palmer’s observations.

Palmer said, “We observe that several of the details of the lawsuit that the commission filed against Binance echo those it previously filed against crypto exchanges Bittrex and Kraken, and we believe these cases in aggregate represent a preview of the action that is likely to be filed against COIN.”

Parallels Drawn and Implications for Coinbase

Palmer points out that the charges made by the SEC against Binance, its CEO Changpeng “CZ” Zhao, and Binance.US concern the distribution of unregistered securities to the general public via the BNB token and the BUSD stablecoin related to Binance. Additionally, the lawsuit asserts that Binance’s staking service broke securities laws. Palmer contends that these actions collectively provide a preview of the potential future legal action that may be brought against Coinbase by drawing comparisons to prior instances.

Market Response and Revenue Risk

The cryptocurrency market saw sharp falls on Monday as a result of the SEC’s statement, with Coinbase’s stock ending the day down roughly 9.1% at $58.71. This most recent development comes after the SEC warned Coinbase in March that it might face enforcement action for listing unregistered securities. Palmer noted, “We estimate that at least 37% of COIN’s net revenue would be at risk if the SEC were to target the company’s crypto token trading and staking operations.” 

Analyst Rating and Investor Outlook

Palmer continues to rate Coinbase as a hold and sets a price objective of $55 for the company, highlighting the necessity for investors to take into account the company’s flexibility in changing its business strategy and regional focus in the case of SEC enforcement action. Coinbase currently has 11 buy ratings, 7 holds, and 6 sell ratings, according to FactSet data, suggesting conflicting opinions among analysts.

Concerns have been expressed concerning possible repercussions for Coinbase as a result of the SEC’s action against Binance. Mark Palmer, a Berenberg analyst, draws attention to the similarities between the lawsuits brought against different cryptocurrency exchanges and suggests that they work as a foreshadowing of potential future legal action against Coinbase. Investors and market participants must evaluate the potential ramifications and Coinbase’s capacity to overcome regulatory obstacles while the industry closely observes these developments. The company must then adjust its operations as necessary.