The U.S. SEC has issued a Wells notice to Coinbase, signaling its intention to initiate enforcement action against the crypto exchange.
The securities watchdog is targeting the crypto exchange’s staking service and token listings.
Coinbase Global Inc’s share price dropped more than 11% in after-hours trading.
The United States Securities and Exchange Commission (SEC) has issued a Wells notice to Coinbase Global Inc. The American crypto giant revealed earlier today that the securities regulator formally announced its plans to initiate enforcement action for possible violations of securities laws. following a cursory investigation.
Coinbase’s staking services and asset listing under scrutiny
According to a blog post by Coinbase, the Wells notice from the SEC pertains to an unspecified portion of the digital assets listed on the crypto exchange, the Coinbase Wallet and Coinbase Earn, which is the exchange’s staking service. The SEC has reportedly denied to specifically identify exactly which assets on the exchange are securities. It is important to note that the Wells notice may not necessarily lead to a lawsuit or the filing of formal charges.
Commenting on the development, the crypto exchange’s CEO Brian Armstrong told his followers on Twitter that his firm is looking forward to participating in the legal process which he believes will provide an open and public forum before an unbiased body, presenting the opportunity to demonstrate the SEC’s unfair and unreasonable behavior.
Paul Grewal, Coinbase’s Chief Legal Officer, revealed in a lengthy Twitter thread that his firm had met with the SEC more than thirty times over the past nine months in order to discuss a route to getting itself registered with the regulator. Grewal alleged that the regulator provided zero guidance regarding the registration process.
The truth is that today there is no clear rule book from the SEC on crypto, and efforts to engage with the SEC are met with silence or enforcement actions. They have not followed a good faith rulemaking process with industry, as required under the APA.”
Paul Grewal, Chief Legal Officer
The Wells notice had a significant impact on Coinbase’s share price. After closing at $77.16, the stock tanked more than 11% in after-hours trading, reaching as low as $66.50. The share price has since climbed back up to $67.12.