Coinbase Shares Surge as Citigroup Upgrades Stock Amid Regulatory Shifts

Coinbase Global Inc. has seen its shares soar this year, and Citigroup’s recent upgrade of the stock signals confidence in the potential for further gains. In a note released Tuesday, Citi analyst Peter Christiansen upgraded Coinbase from neutral to buy, citing a more favorable regulatory environment for the digital asset industry.

“Shifts in the U.S. election landscape and the Supreme Court’s overturning of the long-standing Chevron precedent has changed our view on Coinbase’s regulatory risks,” Christiansen wrote. “We surmise the upside opportunity from a more conducive regulatory environment to be too large to ignore.”

Coinbase shares have jumped by 48% this year, adding more than $21 billion in market capitalization. This rally comes alongside the broader rise of crypto-linked companies as Bitcoin prices have advanced.

Last year, the U.S. Securities and Exchange Commission (SEC) sued Coinbase, alleging securities rules violations. Christiansen argues that the Supreme Court’s recent overturning of the Chevron doctrine, which had allowed federal regulators to interpret unclear laws, could offer Coinbase additional flexibility in its defense.

Additionally, Christiansen noted that the upcoming U.S. election results are becoming more favorable toward the crypto industry. Many have concluded that pro-crypto legislation might fare better under a different administration than the current one. Former President Donald Trump, who is expected to speak at an upcoming Bitcoin conference, is seen as more supportive of the industry.

Citi’s upgrade pushed the consensus recommendation from analysts tracked by Bloomberg to its most positive level in about two years. While the average analyst target price suggests a slight decline of 1.5% over the next 12 months, Christiansen’s new price target of $345 indicates he believes the stock could rally by about one-third.

In the midst of its legal battle with the SEC, Coinbase has filed a motion to compel the regulator to produce private emails from SEC Chair Gary Gensler. This follows Coinbase’s letter to Judge Katherine Polk Failla last week, in which it stated its intention to narrow the scope of its document request after receiving pushback.

Initially, Coinbase sought copies of Gensler’s private communications from before and during his tenure as SEC Chair. The new motion, filed on July 23, now requests Gensler’s private communications during his time at the SEC from 2021 onward, along with other documents.

“Following a preliminary conference with the Court, Coinbase withdrew its requests concerning pre-Chair communications,” the motion stated. “It now moves to compel only documents and communications responsive to Subpoena Request No. 23” and several other SEC requests. Subpoena Request No. 23 pertains to documents related to Gensler’s speeches on the regulatory status of digital assets and exchanges.

Coinbase has argued that these documents are crucial for its defense against allegations that it allowed illegal trading of unregistered securities on its platform. “Documents related to these communications bear directly on the claims the SEC now asserts and on Coinbase’s fair notice defense,” said Coinbase chief legal officer Paul Grewal in a post on X on July 24.

The SEC has refused to search for documents outside its Enforcement Division’s investigative files, citing lack of relevance and undue burden. Coinbase is also seeking documents related to its 2021 public offering, which underwent a six-month SEC review, as well as documents concerning Gensler’s public statements on crypto regulation.

The SEC sued Coinbase in June 2023, accusing the company of violating federal securities laws by listing 13 tokens it claims are securities and operating as an “unregistered securities broker” since 2019.

As regulatory dynamics shift and the political landscape evolves, the future of Coinbase and the broader crypto industry remains a focal point for investors and analysts alike.

Adele Simmons
Financial Desk