As crypto-friendly candidates court voters in the U.S., Citi Research analysts say a recent Supreme Court ruling on the authority of administrative agencies only bolsters Coinbase’s prospects amid its ongoing legal fight with the Securities and Exchange Commission (SEC).
“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,” Citi Research analysts wrote on Tuesday, describing the upside from a favorable environment as “too large to ignore.”
At the same time, Citi Research analysts upgraded Coinbase’s stock (COIN) from “neutral” to “buy,” penciling in a price target of $345 per share. As of this writing, the price of COIN has rallied to $259, a 65% year-to-date bump that has outpaced Bitcoin’s 50% price gains over the same span.
Bitcoin Tops $64,000 as Proxy Stocks MicroStrategy, Coinbase Surge
Bitcoin jumped above $64,000 for the first time in nearly a month on Monday, sending the share price of major stocks associated with the asset higher as traders take stock of shifting tailwinds. The world’s largest crypto by market capitalization rose 5.7% to $64,680, reversing losses incurred at the end of last month over fears of Germany’s Bitcoin sales, CoinGecko data shows. The asset has since dropped back to $64,550 at the time of writing. U.S. Federal Reserve rate cuts and an evolving poli...
Referring to the Supreme Court’s abolishment of “Chevron deference” last month, Citi Research analysts wrote that overturning the 40-year-old legal doctrine “offers additional footing for an improved risk/reward setup” as a crypto-friendly White House appears increasingly possible.
If former president Donald Trump wins in November, crypto advocates are hoping it results in a more favorable regulatory environment for crypto. In May, Trump called out SEC Chair Gary Gensler and Democrats’ regulatory approach to crypto, arguing that they “are very much against it.”
The Chevron deference allowed administrative agencies, such as the SEC, to have the authority to interpret certain laws left vague by Congress. However, legal experts, in the decision’s aftermath, told Decrypt that the Supreme Court’s ruling had put regulators’ “role and firepower” on notice.
Supreme Court Overturns 'Chevron Deference'—And That Might Be Good for Crypto
The crypto industry was quick to celebrate a Supreme Court ruling Friday that abolished “Chevron deference,” a move giving the federal courts more say in determining the scope of what administrative agencies can do. The landmark 6-3 ruling overturned a 40-year-old Court doctrine that let administrative agencies under the President have the authority to interpret certain laws left vague by Congress. For conservatives skeptical of the Executive Branch’s role in regulating health or the environment...
Citi Research analysts wrote that the Supreme Court ruling could influence courts’ interpretation of the Howey Test as well. The SEC has leaned on the legal framework stemming from a 1946 Supreme Court case while accusing Coinbase and other exchanges of violating securities laws.
“The decision does cast doubt whether the SEC’s interpretation of the Howey Test, a key basis employed to test whether an asset is to be deemed an invest contract, remains an infallible construct in their prosecution,” the analysts wrote. “Additionally, the decision perhaps opens the door for Coinbase (and other crypto defendants alike) to invoke the Major Questions Doctrine.”
The Major Questions Doctrine, which prohibits agencies from determining questions of “vast economic and political significance” without explicit authorization from Congress, was brought up by Coinbase last year in a motion to have several charges brought by the SEC dropped.
Supreme Court’s Restrictions on EPA Oversight Could Impact Bitcoin Mining
The Supreme Court issued a ruling on Thursday that limits the Environmental Protection Agency’s (EPA) ability to regulate carbon emissions from power plants, which could have an impact on Bitcoin and other cryptocurrency mining operations that source their power from fossil fuels. Citing the “major questions doctrine,” the court said they “declined to uphold [the] EPA’s claim of ‘unheralded’ regulatory power” over energy plants and that rules need to be specifically mandated by Congress, accordi...
Coinbase argued that Congress had not granted the SEC authority to regulate crypto under the Securities and Exchange Act of 1933. Ultimately, a federal judge in Manhattan found that the SEC had exercised “its congressionally bestowed enforcement authority to regulate ‘virtually any instrument that might be sold as an investment.’”
Still, Citi Research analysts cited two ongoing lawsuits against the SEC that could establish limits to the agency’s regulatory jurisdiction for crypto. They wrote that the cases offer “a challenge to the core of the SEC’s regulation by enforcement strategy.”
“It’s unclear if [the Major Questions Doctrine] would be ultimately successful for Coinbase and other crypto defendants in their respective cases,” the analysts continued. “Yet we believe this element potentially affords greater defense strategy flexibility, as well as improved standing to argue their cases/appeals to higher courts.”
Edited by Ryan Ozawa.
