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, said Berenberg analyst Mark Palmer. The SEC alleged in its suit that Binance, its CEO Changpeng CZ Zhao, and Binance.US offered unregistered securities to the general public in the form of the BNB token and Binance-linked BUSD stablecoin, and that Binance’s staking service violated securities law.
The SEC action led to large declines across the board for crypto markets on Monday, including Coinbase, which closed the session down about 9.1% to $58.71. In March, Coinbase itself received a warning from the SEC that it may soon receive enforcement action tied to its listing of potential unregistered securities. Palmer noted that at least 37% of Coinbase’s net revenue would be at risk if the SEC were to target the company’s crypto token trading and staking operations.
Palmer believes investors should focus on whether Coinbase would have the ability to successfully pivot its business model and geographic focus if it were forced to curtail or cease a large portion of its business activities in the U.S. as a result of an SEC enforcement action. Coinbase currently has 11 buy ratings, 7 holds, and 6 sell ratings, according to FactSet data.