On Tuesday, the shares of cryptocurrency exchange Coinbase experienced a notable 6% increase, driven by renewed optimism stemming from the long-anticipated approval of a bitcoin spot exchange-traded fund (ETF). This development marks a significant turning point for Coinbase, a company that has recently been engaged in a legal battle with the U.S. Securities and Exchange Commission (SEC) in a Manhattan federal court.
In a parallel trend, Grayscale’s Bitcoin Trust also recorded an impressive nearly 5% surge in Tuesday morning trading. Grayscale secured a decisive victory when a federal appeals court formalized a judge’s mandate that instructed the SEC to review the company’s Bitcoin ETF proposal.
Coinbase’s stock price, similarly buoyed by this milestone decision, typically closely follows the overall performance of the broader cryptocurrency markets. The company holds a prominent position as one of the leading crypto custodians and has garnered attention from several prospective ETFs, including BlackRock’s proposed Bitcoin ETF.
Criticism has been mounting against the SEC for its perceived “regulation-by-enforcement” approach, both from industry insiders and members of Congress. Critics contend that the regulator is taking punitive actions against cryptocurrency exchanges in the aftermath of the FTX collapse. In contrast, proponents argue that many cryptocurrencies should be classified as securities, asserting that additional regulation is necessary to establish the SEC’s jurisdiction.
The ongoing jurisdictional dispute has cast a shadow on the share prices of companies with exposure to cryptocurrencies. Despite a year-to-date increase of nearly 119%, Coinbase has yet to reach its pre-crypto-winter levels. Meanwhile, MicroStrategy, another company with cryptocurrency exposure, observed a 12% rise in its shares during Tuesday’s morning trading but remains below 2022 levels.
Coinbase is also poised to make a final filing in its motion to appeal. The company initiated efforts to dismiss the SEC’s claims in August, arguing, in part, that the SEC’s lawsuit fell beyond the scope of the SEC’s authority and that the assets in question did not meet the criteria for securities under the Howey Test. In response, the SEC maintained its position, alleging that Coinbase was indeed involved in “intermediate transactions involving investment contracts.”
Coinbase’s response is expected to be presented in federal court by the end of the day on Tuesday.
