Coinbase Stock Rises 7% With Grayscale ETF Ruling, Court Date Looms

Coinbase CEO Brian Armstrong criticized the US Securities and Exchange Commission. He also said that the cryptocurrency exchange is seeking more investments outside the US

Carlos Jasso | Bloomberg | Getty Images

Cryptocurrency exchange stocks Coinbase rose about 7% on Tuesday afternoon as optimism over a long-awaited approval of a Bitcoin spot exchange-traded fund buoyed the stock. It could be a turning point for the company, which has been battling the U.S. Securities and Exchange Commission in federal court in Manhattan.

Shares of Grayscale’s Bitcoin Trust also rose nearly 5% in Tuesday morning trading. Grayscale’s victory was formalized in the federal appeals court on Monday when a judge’s order for the SEC to review the company’s Bitcoin ETF proposal took effect.

Coinbase’s share price, which was also boosted by this final decision, often closely mirrors the broader cryptocurrency markets in its performance. The company is one of the largest crypto custodians and has been recruited to the role by a variety of potential ETFs, including BlackRock’s proposed Bitcoin ETF.

The SEC has been criticized by both industry and Congress for its perceived “regulation through enforcement” approach. Critics argue that the regulator is prosecuting cryptocurrency exchanges following FTX’s collapse, while proponents say many cryptocurrencies are actually securities and no further regulation is needed to establish the SEC’s jurisdiction.

The dispute over jurisdiction has dampened the share prices of companies with crypto exposure. Coinbase is up nearly 119% year to date, but is still well below its pre-crypto winter levels. Microstrategyanother crypto-exposed company, saw its shares rise 12% during Tuesday morning trading, but remains similarly bearish compared to 2022 levels.

Coinbase will also file a final motion to appeal. The company requested dismissal the SEC’s allegations in August, arguing in part that the SEC’s lawsuit was both outside the SEC’s jurisdiction and that the assets in question did not constitute securities within the meaning of the Howey test. The SEC, for its part, responded keep arguing that Coinbase “performed” “intermediate transactions involving investment contracts.”

Coinbase’s response must be in federal court by the end of Tuesday.

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