The US SEC has taken legal action against New York-based crypto exchange Coinbase, accusing it of offering unregistered securities.
According to the SEC lawsuit, Coinbase never registered as a broker, national securities exchange, or clearing agency, thereby evading the disclosure requirements for securities markets. The SEC alleged that several tokens offered by the exchange, including Solana (SOL), Cardano (ADA), Polygon (MATIC), Filecoin (FIL), Sandbox (SAND), Axie Infinity (AXS), Chiliz (CHZ), FLOW, ICP, NEAR, VGX, DASH, and NEXO, qualify as securities.
Furthermore, the lawsuit claimed that the exchange has been operating as an unregistered security broker since 2019, nearly two years before its initial public offering (IPO) in April 2021.
The lawsuit also asserted that Coinbase’s staking program, which involves five stackable crypto assets, constitutes an investment contract and thus qualifies as a security. Coinbase had previously been in a dispute with the SEC regarding its staking products, claiming that they do not fall under the definition of securities. In contrast, Kraken settled with the SEC and discontinued its staking services in the US.
Addressing the recent lawsuit, SEC chief Gary Gensler stated that the crypto exchange allegedly deprived its customers of essential protections against fraud and manipulation, and avoided proper disclosure and safeguards to prevent conflicts of interest.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement stated that Coinbase was fully aware of the applicability of the federal securities laws to its business activities but deliberately refused to follow them.
SEC On Full Attack Against Crypto Exchanges
Coinbase faced the SEC lawsuit merely a day after the securities regulator filed a lawsuit against Binance, accusing it of breaching securities laws and commingling customer funds. While Binance faced 13 counts of violations across different securities laws, the allegations against Coinbase have left the crypto industry perplexed, especially considering the exchange’s status as a publicly listed company.
The crypto community raised questions about how Coinbase managed to go public in 2021 despite operating as an unregistered security broker. A prominent crypto influencer known as The Wolf expressed that the SEC’s lawsuit against Coinbase could potentially impact Binance’s situation as well.
