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Coinbase Shares Rally on Ripple's Legal Win: Understand the Crypto Exchange's Significant Implications

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Coinbase Rallies After Federal Judge Rules XRP is Not a Security

Significant Win for Ripple and the Crypto Market

Coinbase, the popular cryptocurrency exchange, experienced a surge in shares after a federal judge ruled that Ripple Labs' private XRP token is not a security when sold on an exchange. However, the judge also stated that XRP is considered a security when sold to institutional investors. This ruling is seen as a significant win for both Ripple and the wider crypto market.

Implications for Coinbase's Battle with the SEC

The ruling in the Ripple case has raised optimism that Coinbase might also prevail in its own battle with the Securities and Exchange Commission (SEC). In June, the SEC sued Coinbase, accusing the exchange of operating as an unregistered broker, exchange, and clearinghouse for securities. The outcome of the Ripple case puts into question the SEC's other actions, including its case against Coinbase.

Wall Street's Perspective on Coinbase's Future

Opinions on the future of Coinbase among Wall Street analysts are divided. Wedbush Securities and Needham have both raised their price targets for Coinbase and believe that the ruling in the Ripple case is a positive development for the exchange. On the other hand, Raymond James and Berenberg Capital Markets remain skeptical and caution that the SEC may appeal the ruling. Cowen emphasizes that the Coinbase case is unlikely to be heard until the fall, and that any non-Bitcoin altcoin is at risk of being deemed a security by the SEC.

The Overall Impact on Coinbase

While the ruling in the Ripple case has provided some clarity for Coinbase, the full implications for the exchange are still uncertain. The stock saw a significant rally following the ruling, but some analysts believe that the extent of the rally was not warranted. Many investors are cautiously optimistic about Coinbase's future, but the regulatory pressure on the stock remains a concern.

How the Ruling on XRP Could Impact a New Business

The recent ruling on XRP being deemed not a security when sold on an exchange has significant implications for the crypto market and particularly for Coinbase. For a new business entering the cryptocurrency exchange space, this ruling could have both positive and negative impacts.

On the positive side, the ruling strengthens the argument for new businesses to operate with cryptocurrencies that may have been previously seen as securities. It provides clarity on how certain tokens are treated when sold on an exchange, potentially reducing the regulatory uncertainty and increasing investor confidence. This could attract more users and trading volumes to the platform, driving growth for the business.

However, the ruling also highlights the continuing regulatory pressure faced by cryptocurrency exchanges. The fact that XRP is still considered a security when sold to institutional investors raises concerns for businesses trying to expand their offerings to include institutional clients. It suggests that regulatory scrutiny will continue, potentially creating challenges and obstacles for new businesses navigating the ever-evolving crypto regulatory landscape.

Ultimately, the impact of the ruling on a new business would depend on their specific circumstances and approach. While the ruling may provide some degree of insight into how regulators view certain tokens, it does not guarantee immunity from future legal challenges or regulatory actions. Therefore, new businesses entering the cryptocurrency exchange industry must carefully navigate the legal and regulatory hurdles, staying informed on the evolving landscape, and ensuring compliance to succeed and thrive in this rapidly expanding market.

Article First Published at: https://www.cnbc.com/2023/07/14/why-ripples-partial-court-victory-matters-for-coinbase-.html

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