Summary:
- “Coinbase has never registered with the SEC” as a securities exchange, the U.S. Securities and Exchange Commission filed in its lawsuit against America’s biggest crypto exchange.
- The SEC again listed several crypto tokens like SOL and MATIC as securities in the 101-page document filed in New York’s Southern District.
- Both Coinbase and Binance have now been sued by the SEC for operating an unlicensed securities exchange on U.S. soil.
The U.S. Securities and Exchange Commission (SEC) alleges that Coinbase operates an unregistered securities exchange, brokerage service, and clearing agency. Gary Gensler’s SEC announced the lawsuit against Coinbase a day after suing industry competitor Binance and its CEO Changpeng Zhao for similar violations.
The Coinbase Platform merges three functions that are typically separated in traditional securities markets—those of brokers, exchanges, and clearing agencies. Yet, Coinbase has never registered with the SEC as a broker, national securities exchange, or clearing agency.
SEC Strikes Again
According to the SEC, Coinbase generated billions in revenue while evading the disclosure regime overseeing the U.S. securities market. Similar to its suit against crypto exchange Binance, the SEC lists several tokens as unregistered crypto securities available for trading on Coinbase.
The Commission listed 13 tokens in today’s lawsuit with no mention of ETH, the same as the Binance lawsuit, although the court document states that the security label is not limited to the tokens mentioned.
The SEC named SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH, and NEXO in court documents. Violations tied to staking services offered by the publicly listed crypto exchange were filed 101-page document as well.
Crypto prices slumped further following the SEC’s double-barrel enforcement action against crypto’s largest centralized exchanges. COIN dropped 15% during pre-trading hours on the back of the SEC’s lawsuit.
Coinbase’s alleged failures deprive investors of critical protections, including rulebooks that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspection by the SEC.
– SEC Chair Gary Gensler On Coinbase Lawsuit
The San Francisco-based crypto exchange received a “show cause order” from 10 state securities regulators. This means the company has 28 days to convince state regulators not to serve a “cease and desist” order for unregistered securities sales. The multi-state action includes securities regulators from Alabama, California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington, and Wisconsin.
First Binance, Now Coinbase
Today’s lawsuit comes hours after Binance was accused of similar violations. In Binance’s case, its CEO Changpeng Zhao was also sued. The SEC claimed Binance commingled corporate and client cash in a U.S. entity wholly controlled by CZ.
“We intend to defend our platform vigorously,” Binance responded. CEO Zhao tweeted “4”, his popular code for FUD.
Binance’s response echoed rhetoric from Brian Armstrong and his company arguing that the SEC would rather regulate the nascent industry through blunt misguided enforcement action than engage stakeholders toward developing fair guidance for crypto assets.