The US Securities and Exchange Commission (SEC) has taken legal action against the major New York-based cryptocurrency exchange, Coinbase. In the lawsuit filed in a federal court in New York, the SEC accused Coinbase of unlawfully offering unregistered securities to its customers.
Wu Blockchain, a Chinese reporting media, shared the Twitter thread about the lawsuit filed on Coinbase by SEC:
Breaking: Following Binance, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against cryptocurrency exchange Coinbase in New York federal court.
— Wu Blockchain (@WuBlockchain) June 6, 2023
According to the SEC, Coinbase has never registered as a broker, national securities exchange, or clearing agency, thereby circumventing the necessary disclosure requirements in the securities markets. The lawsuit asserted that several tokens listed and offered by Coinbase, including Solana (SOL), Cardano (ADA), Polygon (MATIC), Filecoin (FIL), Sandbox, Axie Infinity, Chiliz (CHZ), FLOW, ICP, NEAR, VGX, DASH, and NEXO, qualify as securities.
Furthermore, the lawsuit alleged that Coinbase has been operating as an unregistered security broker since 2019, nearly two years before its highly-anticipated initial public offering (IPO) in April 2021.
One specific point of contention raised by the SEC is Coinbase’s staking program, which involves five different crypto assets. The SEC argued that this staking program constitutes an investment contract and qualifies as a security. Coinbase had already been locked in a dispute with the SEC over the classification of its staking products, adamantly asserting that they should not be considered securities.
Gary Gensler, the chairman of the SEC, commented on the recent lawsuit against Coinbase, highlighting the alleged denial of essential protections for customers, which include safeguards against fraud, manipulation, and conflicts of interest. Gensler emphasized the importance of such safeguards and the need for companies operating in the cryptocurrency space to adhere to regulatory requirements.
The SEC’s lawsuit against Coinbase comes on the heels of another lawsuit the securities regulator took against Binance, one of the world’s largest cryptocurrency exchanges. The SEC filed a separate lawsuit against Binance, accusing the platform of violating securities laws and commingling customers’ funds.
