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 it’s been operating as an unregistered exchange, broker and clearing agency. The regulator also said that Coinbase’s 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 observers 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 in the U.S. They believe that clear operating rules could finally be set. Others see this development as a major threat to Coinbase’s business, going beyond near-term financial implications. About 45% of Coinbase’s 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 Coinbase’s 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 Coinbase’s total revenue falling 25-30% and drive Coinbase to be substantially unprofitable,” Raymond James’ Patrick O’Shaughnessy wrote. SVB MoffettNathanson also sees 25% to 30% of revenue at risk. However, analyst Lisa Ellis noted that in the first quarter the company’s expenses were down almost 30%, while volumes were up more than 30%. “The company now is very prepared and has demonstrated it’s very capable of operating their business in almost any trading context,” Ellis told CNBC. “They’ve really reset their cost base back to basically pre-bubble, pre-2021 levels … their cash balances haven’t budged at all over the last year and a half … and so we don’t worry about Coinbase’s ability to function.” JMP Securities 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 that’s certain is that Coinbase and the SEC are in for a long fight, one that could even exceed the term of Gary Gensler, chair of the regulatory agency. Whether clarity comes through a settlement or through new legislation remains to be seen. Until then, “it’s business as usual at Coinbase,” according to Canaccord Genuity. Here’s what else Wall Street is saying: SVB MoffettNathanson – Outperform “For investors who can stomach the uncertainty in Coinbase’s business … we view the pullback in the stock over the past two days as an attractive entry point into Coinbase’s 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 Coinbase’s 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 court/judge to determine how crypto assets should be regulated — a key step in enabling the crypto industry overall to expand and thrive.” Raymond James – Underperform “Coinbase’s inability to offer a comprehensive cryptocurrency ecosystem that includes a wide array of altcoins, staking, and other crypto-related services may result in a reduced ability to competitively differentiate relative to non-crypto-native platforms,” analyst Patrick O’Shaughnessy wrote Tuesday. “This, in turn, may lead to more price competition over time.” “The SEC lawsuit highlights that Coinbase simultaneously operates as a broker-dealer, an exchange, and a clearing agency/custodian,” he added. “It’s 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 don’t 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 SEC’s 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 30-40% 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 cost-cutting, 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 COIN’s 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.” —CNBC’s Michael Bloom contributed to this report.