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A few hours after the lawsuit against Binance and its founder Changpeng Zhao, the US Securities and Exchange Commission (SEC) has opened a similar case against its rival Coinbase.
The complaint filed against two companies (Coinbase and Coinbase Global) is already available online.
Minutes after the news broke, Bitcoin (BTC) crashed to $25,500.
Bitcoin price history | Source: CoinMarketCap
The SEC claimed in its filing that Coinbase has operated in the United States since 2019 without registering as a broker, national securities exchange, and clearing house.
Also, the regulator claimed that Coinbase’s staking program included “five stakingable crypto assets” — Ethereum (ETH), Cosmos (ATOM), Solana (SOL), and Tezos (XTZ), and called the program an investment contract, making it one security made . In addition, the lawsuit stated that tokens such as SOL, DASH, FLOW, ADA, AXS, FIL, SAND, MATIC, CHZ, ICP, NEAR, VGX and NEXO are securities.
Today we charged Coinbase, Inc. with operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency and for failing to register the offer and sale of its crypto asset staking-as-a-service program.https://t.co/XPG2gDkxtV pic.twitter.com/hCdVMw8B2v
— U.S. Securities and Exchange Commission (@SECGov) June 6, 2023
SEC Chairman Gary Gensler commented on the lawsuit as follows:
“Coinbase’s alleged failures deprive investors of key protections, including anti-fraud and manipulation policies, proper disclosure, conflict of interest protections, and routine SEC inspections.”
SEC Chairman Gary Gensler
Coinbase stock is down 16% premarket following the SEC lawsuit. However, most reactions from crypto stakeholders pointed to some issues with the SEC lawsuit and questioned how Coinbase might have been operating as an unregistered exchange after the regulator gave the platform the green light to become a public company in April 2021.
An excerpt from the court document now states:
“The statement of a registration statement on Form S-1 does not constitute or endorse an opinion by the SEC or its staff as to the legality of an issuer’s underlying business.”
SEC Complaint Against Coinbase
The latest lawsuit came a day after the SEC sued Binance and CEO Changpeng Zhao for violating securities laws and alleging that the crypto exchange had commingled users’ funds. In response, Binance denied the allegations, adding that the SEC’s action was more an attempt to demonstrate judicial power over other regulators than to protect investors.
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