- Coinbase shares escalated by over 24% due to a partial SEC vs Ripple Labs case dismissal, a surge Berenberg Bank sees as possibly excessive.
- Investors saw the ruling as a dismissal of the SEC’s argument against Coinbase, but Berenberg suggests that the judge’s decision was narrower and pertains primarily to primary market transactions.
The jump in Coinbase’s (COIN) stock price following a recent court verdict in favor of Ripple Labs could be overinflated, Berenberg Bank suggests in a fresh research report. On Thursday, Coinbase shares swelled by over 24% after the U.S. District Court dismissed a part of the Securities and Exchange Commission’s (SEC) case against Ripple Labs, decreeing that the company’s XRP token is not a security.
This escalation in the value of COIN shares, according to Berenberg, largely originates from investors interpreting Judge Torres’ decision as a comprehensive rebuttal of the SEC’s lawsuit against Coinbase. In their June 6 lawsuit, the SEC contended that a significant portion of the tokens exchanged in secondary-market transactions on Coinbase’s platform are unregistered securities.
Misinterpretation of the Court’s Stance
Berenberg analysts, led by Mark Palmer, underscore that a nuanced understanding of the court’s verdict indicates the judge did not, in fact, reject the SEC’s argument outright. The SEC had launched a lawsuit against the Nasdaq-listed crypto exchange, accusing it of breaking federal securities law. Coinbase, according to the SEC, functioned as an unregistered broker, exchange, and clearing agency simultaneously, acting as an intermediary and facilitating bids while also serving customers and managing orders.
The analysts further elucidated that the court’s verdict centered on primary market transactions through which Ripple sold XRP. This is different from Coinbase’s role, which involves facilitating secondary-market transactions on its exchange.
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Berenberg underscored that Judge Torres’ conclusion that XRP, on its own, is not a security has minimal impact on Coinbase. This is because the judge concurrently noted that the sale of XRP could indeed constitute a securities transaction.
Berenberg maintains a hold rating on Coinbase shares and a price target of $39, even as the stock closed yesterday at $107, possibly inflated by the misinterpretation of the XRP ruling.
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