Citi thinks cryptocurrency exchange Coinbase’s future will be plagued with regulatory uncertainty, and investors may want to steer clear because of that. The firm downgraded shares of the platform to neutral/high risk from buy/high risk with a $65 price target, down from $80. That equates to roughly 29% upside for investors compared to Monday’s $50.14 closing price. Analyst Peter Christiansen said the regulatory unpredictability facing the broader cryptocurrency sector is a looming threat to Coinbase, despite the company remaining a leader among exchanges in the U.S. “Coinbase is now tasked to advocate for a reputationally damaged industry and pave a sustainable pathway towards regulatory compliance,” Christiansen said. “We lower our rating to Neutral/High-Risk on the belief that until the regulatory ‘rules of the road’ are better established in the U.S., the stock will remain weighed down by this high level of uncertainty.” COIN YTD mountain Coinbase stock could face more pressure as the legal dispute with the U.S. Securities and Exchange Commission unfolds, Citi says. The analyst noted that because the dispute between the Securities and Exchange Commission and Coinbase has yet to show signs of abating, the company will remain under pressure until both sides show a willingness to collaborate. But Citigroup isn’t convinced that’s likely, especially since Coinbase is pursuing its own lawsuit against the SEC in response to a Wells notice received in March. Christiansen daid that, despite cryptocurrencies already facing intense scrutiny, the Coinbase debacle has made the spotlight even brighter. “While the SEC has taken roughly 50 enforcement actions in the crypto space to date, not since Coinbase received a Wells notice in late March (Coinbase Receives a Wells Notice from the SEC) has the debate on crypto regulation reached such a fevered pitch,” he said. Still, cryptocurrencies have been on a tear so far in 2023. The two largest cryptos by market capitalization, bitcoin and ether, have gained 69% and 53% from the start of the year, respectively. Coinbase shares fell more than 1% after the downgrade. The stock has fallen more than 25% this quarter. Still, it’s up 41.7% for the year through Monday’s close. — CNBC’s Michael Bloom contributed to this report.