Coinbase (COIN) shares fell 5.3% to $67.07 on July 25, as it emerged that the company is facing a SEC probe that could lead to a lawsuit. COIN stock has dropped more than 70% year-to-date amid a broad selloff in equities and cryptocurrencies. Coinbase operates a crypto trading platform, offering products such as Bitcoin (BTC-USD), Ethereum (ETH-USD), and Dogecoin.
Did Coinbase’s Crypto Listings Break Rules?
According to a Bloomberg report, the SEC is investigating whether Coinbase has violated its rules by offering securities trading to its members. Coinbase offers more than 150 cryptocurrencies, and it has been expanding its listings to meet traders’ demand.
The SEC considers certain cryptocurrencies to be securities. Coinbase cannot offer securities on its platform unless it registers with the SEC. If the SEC determines in the probe that Coinbase has improperly offered securities trading to its members, it could sue the company.
Coinbase’s Former Manager Faces Insider Trading Lawsuit
Before the SEC’s probe into whether Coinbase may be improperly offering securities trading came to light, the agency recently sued a former Coinbase manager on charges of insider trading. The lawsuit alleged that the manager tipped a relative and a friend to purchase certain cryptocurrencies that Coinbase was about to list on its platform. Crypto tokens tend to soar when Coinbase announces their support in what has come to be dubbed the “Coinbase Effect.”
While Coinbase has not been faulted in the former manager’s insider trading lawsuit, the SEC said that some of the tokens traded in the scheme were securities. The agency went on to say that some of the tokens it determined to be securities are listed on Coinbase. However, Coinbase insists that it does not offer securities on its platform.
Analysts are Cautiously Optimistic About Coinbase
The Street is cautiously optimistic about the Coinbase stock with a Moderate Buy consensus rating, based on 12 Buys, six Holds, and two Sells. The average COIN price target of $112.78 implies 68% upside potential to current levels.
Bloggers are Fairly Bullish on COIN Stock
TipRanks data shows that financial blogger opinions are 70% Bullish on COIN, compared to a sector average of 65%.
Key Takeaway for Investors
Nobody knows when the SEC probe into Coinbase’s crypto listings will conclude or whether the agency will decide to sue the company. However, the investigation adds another dose of uncertainty around Coinbase’s stock. The probe comes at a time when Coinbase also faces a challenging business environment that has weighed on its stock and forced the company to cut jobs.
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