(Bloomberg) -- Coinbase Global Inc.’s recent hot streak has come to an abrupt end after a warning notice from the Securities and Exchange Commission about potential violation of securities law renewed uncertainty over extensive parts of the biggest US crypto exchange’s business. 

Shares of Coinbase plunged 14% in New York, after it disclosed late Wednesday that it had received a so-called Wells notice from the SEC. Coinbase said several business lines could face potential enforcement actions, including spot market, asset listing, staking services, Coinbase Prime, and Coinbase Wallet. In a response, Paul Grewal, chief legal officer of Coinbase, said the company is “confident in the legality” of its assets and services, and will operate its products as usual. The stock registered its longest winning streak on record earlier this week. 

The SEC move intensified a long-running dispute between the watchdog and the digital-asset company. “It could be just a precursor of more enforcement actions against Coinbase and the whole industry,” said Owen Lau, analyst at Oppenheimer & Co. in an interview. Based on Coinbase’s assessment, the SEC warning “covers almost everything - other than interest income. That makes it extremely challenging,” he said. 

Even with Thursday’s decline, the shares are up 87% this year amid the rebound in crypto prices. The stock, which at more than $300 at the end of 2021, slumped 86% last year. 

“This is now a significant overhang to the stock,” analysts at Mizuho Group including Dan Dolev wrote in a note. Even if there’s no near-term disruption, the listings of alternative coins may face risk of application denial, which could significantly weigh on Coinbase’s ability to generate revenue, they said.

Analysts at Jefferies said the Wells notice is an “ominous sign” and that they estimate about 35% of net revenue is potentially at-risk, depending on SEC’s course of action. 

Among potential outcomes, at best, Coinbase could face monetary penalties and get a clear path to remediation without a significant disruption to its services, analysts at KeyBanc Capital Markets including Alex Markgraff wrote. 

But at worst, “we see the prospect of a lengthy and costly legal battle between Coinbase and the SEC resulting in some form of injunctive relief, disgorgement, or civil penalty,” they wrote. Even a “middle-ground” outcome could include a potentially lengthy legal process. 

(Updates with closing share price.)

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