Analysts Think Coinbase Will Succeed in the SEC Lawsuit

Could the new BlackRock bitcoin-based exchange-traded fund (ETF) application help pave the way for a Coinbase and SEC settlement or relationship? According to some analysts, the answer is “yes.”

Coinbase Could Be Successful

Coinbase was recently listed as a custody provider in the application submitted by BlackRock. This, according to several industry experts, is a huge vote of confidence for the firm given Coinbase is currently under the scrutiny of the SEC, which has filed a lawsuit against the exchange for allegedly operating as an unlicensed broker.

This was a move that really shocked many executives, who claim to have met with members of the SEC several times over a period of nine years to ensure they were fully compliant. In any case, Coinbase is denying it engaged in any wrongdoing at the time of writing.

If the BlackRock application were to somehow garner approval from the SEC, could this pave the way for an easy outcome for Coinbase? Several analysts weighed in on the situation, with Matt Kunke – a research analyst at GSR – saying:

While the exact catalyst for BlackRock’s first-time filing remains unknown, it may be due in part to Grayscale’s progress in its lawsuit with the SEC, [BlackRock’s] perceived ability to maneuver the current regulatory climate, and/or its ability to procure a new surveillance sharing agreement with Coinbase.

Mark Connors – head of research at digital asset manager 3iQ – also threw his two cents into the mix, saying:

In my opinion, [the asset managers] are downplaying the risk of a successful lawsuit against Coinbase. BlackRock’s filing means that they vote that the SEC will not prevail in their case against Coinbase.

Jeff Feng – co-founder at Sei Labs – offered a similar sentiment. He mentioned:

This choice suggests that these institutions believe that Coinbase has a robust legal defense in its operations, further fueling the optimism around the potential for approval. Given the current circumstances, there are indeed strong signals suggesting that approval of these spot bitcoin ETFs could be on the horizon. However, it’s vital to remember that in this rapidly evolving regulatory landscape, an elevated probability doesn’t necessarily translate into a guaranteed outcome.

This is an Entirely Different Situation

In a note to investors, analysts at Alliance Bernstein said now that BlackRock has entered the picture, the SEC is “fairly” likely to approve a spot bitcoin ETF application given it’s coming from a licensed and registered (traditional) financial company with a long history of operating on Wall Street.

Prior to this, the bitcoin ETF applications that made headlines have all come from companies that didn’t have BlackRock’s reputation or standing, nor had they been around as long. Also, they were not registered and were part of an industry that at that point, was still considered taboo or illegitimate.