Key Takeaways
- SEC sued Coinbase, alleging that the exchange is operating illegally as it has failed to first register with the regulator.
- SEC in its lawsuit has claimed that the 13 assets listed on Coinbase, including Cardano, Polygon, and Axie Infinity, were considered crypto asset securities
Leading crypto exchange, Coinbase has come under the U.S. Securities and Exchange Commission’s regulatory scrutiny once again. On Tuesday, SEC sued Coinbase, alleging that the exchange is operating illegally as it has failed to first register with the regulator.
The SEC lawsuit against Coinbase comes just hours after the regulatory body sued Binance-the world’s largest crypto exchange, for allegedly operating an illegal exchange defrauding investors and for misusing customer funds.
The SEC in its lawsuit against Coinbase, has claimed that the exchange’s staking program includes five stackable crypto assets, making it an investment contract and, therefore, a security. The allegations come amid SEC already submitting a petition to the regulatory body explaining why staking can’t be universally labeled as securities.
SEC, in its lawsuit, further alleged that the 13 assets listed on its platform, including Cardano, Polygon, and Axie Infinity, were considered crypto asset securities.
Commenting on the lawsuit, SEC chair Gary Gensler said that the exchange has “deprived investors of critical protections, including rulebooks that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspection by the SEC.”
Gurbir Grewal, director of the SEC’s Division of Enforcement, also alleged that Coinbase was fully aware of the applicability of the federal securities laws to its business activities but deliberately refused to follow them.”
SEC and Coinbase have always had a bitter relationship. The SEC has been ramping up efforts to crack down on the crypto industry since the collapse of FTX last year, and staking services such as Coinbase’s Earn are under increased scrutiny for not being registered. In March 2023, SEC issued a Wells notice to Coinbase threatening to sue the exchange for its unregistered offerings.
In response to SEC’s constant scrutiny, Coinbase has often publicly criticized the regulator body for what it describes as a vague regulatory structure, even petitioning SEC last year to explain how digital assets could fit within securities laws.
The lawsuit also comes amid representatives from Coinbase, Robinhood, and the United States commodities regulator getting asked to testify before Congress on June 6 to discuss thoughts on the newly proposed crypto bill.
