- The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Coinbase, alleging that the crypto exchange was acting as an unregistered broker and exchange, causing Coinbase’s stock to drop significantly.
- The SEC alleges that Coinbase’s prime brokerage, exchange, and staking programs violate securities laws, with at least 13 crypto assets available to Coinbase customers considered as “crypto asset securities.”
The U.S. Securities and Exchange Commission (SEC) has initiated a lawsuit against cryptocurrency exchange Coinbase, alleging that the company has been operating as an unregistered broker and exchange. The lawsuit, filed in New York federal court, demands that Coinbase be permanently restrained from continuing these alleged activities. Following the news, Coinbase’s shares fell by 15% in premarket trading.
The SEC’s complaint focuses on Coinbase’s prime brokerage, exchange, and staking programs, which the regulator claims violate U.S. securities laws. The SEC alleges that Coinbase has been defying regulatory structures and evading the disclosure requirements of U.S. securities law for years.
According to the SEC, at least 13 crypto assets available to Coinbase customers, including Solana’s SOL token, Cardano’s token, and Protocol Labs’ Filecoin token, are considered “crypto asset securities.” SEC chair Gary Gensler stated that Coinbase, despite being subject to securities laws, has unlawfully offered exchange, broker-dealer, and clearinghouse functions.
The SEC’s complaint also identifies Coinbase’s staking program as an investment contract and an unregistered security. The program, which allows investors to earn financial returns through Coinbase’s managerial efforts, was previously targeted by the SEC, leading to the closure of crypto exchange Kraken’s similar service.
Coinbase, known for its sophisticated presence and reputation as a safer, regulated option compared to other exchanges, has been identified by many in the crypto community as the only entity with the financial and institutional resources to challenge the SEC. However, the SEC argues that Coinbase’s advertising campaigns, which actively solicit new clients, contribute to the case against the exchange.
This lawsuit marks a significant development in the ongoing tension between regulatory bodies and the rapidly evolving cryptocurrency industry. As the situation unfolds, it will be crucial to observe how these dynamics shape the future of cryptocurrency.
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