Coinbase (COIN) shares have outperformed the market despite U.S. District Judge Jed Rakoff’s emphatic rejection of the July 13 ruling that Ripple Labs did not violate securities laws by selling its XRP token on crypto exchanges. According to investment bank Berenberg, Rakoff’s ruling characterized [Judge Torres’] misinterpretation of the Howey test used to determine if an asset is a security as asserting that the Howey test ‘makes no distinction between purchasers.’ This could potentially complicate Coinbase’s use of the ruling in its own case against the SEC.
Rakoff’s rejection also dealt a potential blow to Coinbase’s defense of the major questions doctrine, which is derived from a Supreme Court ruling that prevents agencies from exceeding their mandate. Berenberg maintained its hold rating on Coinbase shares with a $39 price target, reflecting the bank’s view that the stock is uninvestable in the near term. Coinbase shares were down 8% to $90.85 in early trading on Tuesday, but have increased 155% so far this year. The crypto exchange reports its second-quarter earnings after the close on Thursday.