After the U.S. District Court decided on July 13 that Ripple Labs did not break the law by selling its XRP coin on cryptocurrency exchanges, Coinbase (COIN) shares have outperformed the market.Investment bank Berenberg said in a research report on Tuesday that another judge from the same court, however, strongly rejected the Ripple decision on Monday.
“In his ruling, U.S. District Judge Jed Rakoff of the Southern District of New York rejected Judge Torres’ distinction between institutional sales and sales to retail investors on crypto exchanges, which he characterized as a misinterpretation of the Howey test used to determine if an asset is a security,” analysts led by Mark Palmer wrote.
The analysts stated that Rakoff’s denial could make it more difficult for Coinbase to use that decision in its own action against the SEC.
The bank notes that Judge Rakoff in his ruling made a direct reference to Judge Torres’ ruling in “asserting that the Howey test ‘makes no distinction between purchasers.’”
In order to determine whether a transaction meets the criteria for an investment contract, the Howey Test is related to the U.S. Supreme Court case.A transaction is categorized as a security if it is thought to constitute an investment contract.The major questions theory, which derives from a Supreme Court decision that forbids agencies from going beyond their scope, is another of Coinbase’s arguments against the SEC’s case, according to the newspaper.Judge Rakoff disallowed the application of the theory when Terraform Labs cited it in support of itself, throwing Coinbase’s argument even another possible setback.
With a price objective of $39, Berenberg kept its hold rating on Coinbase shares, underscoring the bank’s belief that the stock is “uninvestable” in the foreseeable future.In early trading on Tuesday, Coinbase shares fell 8% to $90.85, although year-to-date gains are up 155%.After the market closes on Thursday, the cryptocurrency exchange releases its second-quarter earnings.