The U.S. Securities and Exchange Commission (SEC) has brought a lawsuit against New York-based crypto exchange Coinbase, accusing it of offering unregistered securities to the public.
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
The filing alleges that Coinbase has never registered as a broker, national securities exchange, or clearing agency, thereby circumventing the disclosure scheme for securities markets.
This move against Coinbase comes in the wake of a similar lawsuit filed against Binance for violating securities laws and mishandling customer funds.
The SEC’s lawsuit against Binance is considered a precursor to the action taken against Coinbase, as noted by Berenberg analyst Mark Palmer.
The impact of these regulatory actions has been significant. Following the SEC’s announcement, crypto markets, including Coinbase, experienced significant declines. Coinbase’s stock, for example, fell by roughly 9.2% to $49.81.
In the wake of these lawsuits, investors are focusing on the future of these crypto exchanges.
“Investors should be focusing on whether Coinbase would have the ability to successfully pivot its business model and geographic focus if it were forced to curtail or cease a large portion of its business activities in the U.S. as a result of an SEC enforcement action”, Palmer notes.
Coinbase is currently under SEC investigation and could face enforcement action tied to its listings of potential unregistered securities. The crux of the issue lies in whether cryptocurrencies can be classified as securities, a notion the SEC supports but crypto firms like Coinbase counter.
