analysts are split on how coinbase shares perform from here as the company enters a battle with the securities and exchange commission on tuesday the sec sued the crypto services provider  alleging that its been operating as an unregistered exchange broker and clearing agency the regulator also said that coinbases staking program violates securities laws and that at least 13 crypto assets listed on the site are considered securities according to the complaint coinbase shares dropped 12 tuesday while prices of cryptocurrencies climbed  cathie wood upped her stake in the crypto service provider by more than 20 million as shares swooned some on wall street see the lawsuit as the first step on the path to what could be a watershed moment for coinbase and the crypto industry there may finally be clear rules for operating in this industry in the us others see this development as a major threat to coinbases business going beyond nearterm financial implications about 45 of coinbases current transaction volume takes place in crypto assets other than bitcoin and ether and revenue tied to that activity likely has incremental margins of 90 or more raymond james said in a note staking represents 10 of coinbases total revenue but has incremental margins of just 25 according to the note coin 5d mountain coinbase shares after the sec sued the company tuesday in a simplified analysis a 40 reduction in retail transaction fees and 100 reduction in staking revenue would result in coinbases total revenue falling 2530 and drive coinbase to be substantially unprofitable raymond james patrick oshaughnessy wrote svb moffettnathanson also sees 25 to 30 of revenue at risk however analyst lisa ellis noted that in the first quarter the companys expenses were down almost 30 while volumes were up more than 30 the company now is very prepared and has demonstrated its very capable of operating their business in almost any trading context she told cnbc theyve really reset their cost base back to basically prebubble pre2021 levels… their cash balances havent budged at all over the last year and a half … and so we dont worry about coinbases ability to function jmp pointed out that some 20 of revenue is derived internationally where the regulatory environment is more progressive knowing the scope of the allegations against coinbase allows the company to focus its investments in other areas and continue to diversify its business ellis noted additionally with the complaint coming a day after the sec sued binance  coinbase is likely to see new trading volumes near term she added once its own lawsuit is resolved volume may rise over the long term too one thing thats certain is that coinbase and the sec are in for a long fight one that could even exceed the term of the gary gensler chairman of the regulatory agency whether clarity comes through a settlement or through new legislation remains to be seen until then its business as usual at coinbase according to canaccord genuity heres what else wall street is saying svb moffettnathanson – outperform for investors who can stomach the uncertainty in coinbases business … we view the pullback in the stock over the past two days as an attractive entry point into coinbases stock analyst lisa ellis wrote in a wednesday note although the outcome of the sec lawsuit is uncertain we at least know now what the scope is eliminating a major overhang from the stock and capping the downside risk to coinbases business we believe the sec lawsuit likely increases the likelihood that we will see crypto legislation from congress as congress is unlikely to want a courtjudge to determine how crypto assets should be regulated a key step in enabling the crypto industry overall to expand and thrive raymond james – underperform coinbases inability to offer a comprehensive cryptocurrency ecosystem that includes a wide array of altcoins staking and other cryptorelated services may result in a reduced ability to competitively differentiate relative to noncryptonative platforms analyst patrick oshaughnessy wrote tuesday this in turn may lead to more price competition over time the sec lawsuit highlights that coinbase simultaneously operates as a brokerdealer an exchange and a clearing agencycustodian he added its possible that one outcome of this lawsuit is that coinbase will be forced to separate these activities thus potentially disrupting its entire operating model jefferies – hold if sec prevails in what is likely to be a lengthy legal process far from certain the path forward for coin as a viable biz would be in serious doubt said analyst trevor williams on tuesday the sec … stated in its complaint that unless coin is permanently restrained and enjoined coin will continue to violate securities laws because there appears to be no viable path for coin to register its exchange with the sec we believe this would in effect prevent coin from being able to operate its exchange domestically … this outcome is contingent on the sec being successful which we dont know the likelihood of these decisions will made in the court of law jmp – outperform our base case remains that the industry will eventually get regulatory clarity and coinbase remains well positioned to weather the storm said analyst devin ryan on tuesday while the secs lawsuit certainly represents an overhang for the business in the near term it is not unexpected and we actually view the additional clarity it provides on its position without much surprise as an incremental positive for coinbase investors should assess and size an investment in coin accordingly particularly given elevated levels of regulatory risk and related volatility which in turn can impact business levels as well creating much wider risk bounds than our broader coverage that being said we remain hopeful that the industry will ultimately progress toward canaccord genuity – buy while we would estimate that in an extreme outcome perhaps 3040 of coin revenue could be at risk here the timeline to getting to real p  l impact risk is likely pretty lengthy and in the meantime political winds and other macro factors are likely not standing still analyst joseph vafi wrote in a tuesday note we also want to underscore that the coin business model is doing well right now he added after material costcutting more focus on key parts of the business and the nice rebound to underlying crypto spot prices coin was nicely profitable again in q1 with a few nice tailwinds to their backs from here bank of america – underperform we think these latest developments illustrate ongoing regulatory headwinds which not only could threaten part of coins business model but also represent a big management distraction analyst jason kupferberg said in a note tuesday we also note that crypto trading volumes ytd have been noticeably weaker than in 2022 despite a rebound in crypto prices in our view the regulatory overhang will likely only exacerbate this issue and likely result in downside to current coin estimates —cnbcs michael bloom contributed to this report