‘We do think we can win’ SEC lawsuit, Coinbase says

Coinbase reported second-quarter earnings on Thursday, releasing its first financial results since the US Securities and Exchange Commission filed a lawsuit against the exchange. 

The company posted a loss per share of 42 cents, beating analyst expectations of a loss per share of 76 cents. The company reported adjusted revenue of $708 million, which again beat expectations of $628 million, according to FactSet analysts.

Subscription revenue clocked in at $335 million — down 7% quarter over quarter — while transaction revenue came in at $327 million. Last quarter, the subscription revenue came in at $362 million, with $375 million in transaction revenue.

On the call, CEO Brian Armstrong noted that, despite the crypto bear market with the “lowest volatility we’ve seen in years, Coinbase is financially healthy.”

Coinbase’s stock was up roughly 154% year to date, closing at $90.75 ahead of earnings Thursday. Its price was up more than 7% in after-hours trading following the earnings release.

By the end of the second quarter, Coinbase reported that USDC had risen to $1.8 billion from $1.2 billion due, in part, to a $500 million inflow from MakerDAO.’

On the bitcoin ETF front, Chief Operating Officer Emilie Choi noted that the pending approval of any or all bitcoin ETFs could “broaden the reach of the asset class,” but “there’s a lot of work to be done before the ETFs are even approved and available.”

Prior to the earnings release, analysts told Blockworks they were preparing for a rough showing.

Morningstar’s Michael Miller told Blockworks that “any update related to Coinbase’s regulatory issues would be of great interest.”

On the regulatory front, Coinbase said there were signs of progress, with the US showing a “pathway for bipartisan legislation that could enshrine consumer protections and an equitable market structure framework.”

“Coinbase is committed to helping ensure America passes crypto legislation and is not left behind. We’ve also begun activating crypto users across the US to ensure their voices are heard in our democracy,” Armstrong said.

Berenberg analyst Mark Palmer said he sees “no reason why” Coinbase’s guidance should be “particularly encouraging.”

The SEC filed its lawsuit against the crypto company back in early June, accusing it of operating as an unregistered exchange, offering unregistered securities in the process. 

“We do think we can win,” Paul Grewal, chief legal officer, said on the call. But Coinbase is also equally focused on getting regulatory clarity which means they’re looking at not only the litigation but also the way that policymakers are approaching crypto. 

Grewal added that Coinbase plans to submit a motion to dismiss on Friday.

Coinbase is also locked in another suit, this time as the plaintiff, against the SEC, in a bid to seek regulatory clarity.

Update 6:00 pm ET: Updated headline, added comments and context throughout.

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