Coinbase, bitcoin miners jump as court sides with Grayscale over SEC

Shares of Marathon Digital (MARA) and several other bitcoin miners are soaring alongside an increase in the price of Bitcoin after the U.S. Court of Appeals for the District of Columbia sided with Grayscale, saying the Securities and Exchange Commission’s denying Grayscale Investments permission to launch a spot-bitcoin ETF was unreasonable.

COURT SIDES WITH GRAYSCALE: Bitcoin miners are in the spotlight on Tuesday after the U.S. Court of Appeals for the District of Columbia sided with Grayscale, which maintains its proposed bitcoin exchange-traded product is materially similar to the bitcoin futures exchange-traded products and should have been approved to trade on NYSE Arca, and vacated a prior SEC order that had denied approval of Grayscale’s bitcoin fund.

“It is a fundamental principle of administrative law that agencies must treat like cases alike. The Securities and Exchange Commission recently approved the trading of two bitcoin futures funds on national exchanges but denied approval of Grayscale’s bitcoin fund. Petitioning for review of the Commission’s denial order, Grayscale maintains its proposed bitcoin exchange-traded product is materially similar to the bitcoin futures exchange-traded products and should have been approved to trade on NYSE Arca. We agree. The denial of Grayscale’s proposal was arbitrary and capricious because the Commission failed to explain its different treatment of similar products. We therefore grant Grayscale’s petition and vacate the order,” the court said.

“NYSE Arca presented substantial evidence that Grayscale is similar, across the relevant regulatory factors, to bitcoin futures ETPs. The Commission failed to adequately explain why it approved the listing of two bitcoin futures ETPs but not Grayscale’s proposed bitcoin ETP. In the absence of a coherent explanation, this unlike regulatory treatment of like products is unlawful. We therefore grant Grayscale’s petition for review and vacate the Commission’s order,” the court added.

GOOD NEWS FOR BITCOIN, LESS SO FOR COINBASE: Commenting on the court decision to side with Grayscale, Mizuho says this is “good news for Bitcoin, less so for Coinbase.” The firm believes the perceived positive momentum for the legal battle between Coinbase (COIN) and the SEC is likely driving the majority of the move in the stock intra-day. Mizuho, however, is “less enthused” as the launch of a Bitcoin ETF further commoditizes Bitcoin trading in the U.S. In its view, heightened competition in an asset category that is already seeing less retail engagement, will likely drive pricing pressure over time. Overall, Mizuho believes a Bitcoin ETF could increase competition and put pricing pressure on retail take rates. Plus, Coinbase’s reliance on Bitcoin revenue has only increased, from 31% of transaction revenue in Q2 2022 to nearly 40% in Q2 2023, it adds. The firm has an Underperform rating on Coinbase with a price target of $27,

PRICE ACTION: In Tuesday morning trading, shares of Marathon Digital have jumped over 24% to $13.21, while Coinbase’s stock has gained about 14% to $83.93. Also higher are shares of Bit Digital (BTBT), Core Scientific (CORZ), Greenidge Generation (GREE), MicroStrategy (MSTR), Riot Platforms (RIOT), Stronghold Digital Mining (SDIG) and TeraWulf (WULF).