The 3 Takeaways From the Lawsuit Between the SEC and Coinbase

The charges filed by the US Securities and Exchange Commission (SEC) against Coinbase are very reminiscent of the Binance case from just a day ago – but also contain some key differences.

Here’s a closer look at the text and implications of the commission’s 101-page lawsuit against America’s largest crypto exchange.

Coinbase vs Binance: Comparing Lawsuits

Much like a file Binance lawsuit On Monday, the Securities and Exchange Commission first shipment It was against Coinbase to serve the functions of a broker, national stock exchange, or clearing agency, yet neglect to register as any such business.

According to the authority, the failure to register has left investors “deprived of the disclosure and protection” to which they are entitled, thus exposing them to “significant risks.”

The filing also accused Coinbase of listing a large number of “crypto-asset securities” on its platform and Named 13 cryptocurrencies that fit the bill. These included the top 20 cryptocurrencies by market cap, such as Solana (SOL), Cardano (ADA), and Polygon (MATIC).

Coinbase has claimed in the past that it applies the Howey test — the primary test conducted by the Securities and Exchange Commission (SEC) to determine whether a financial asset constitutes an investment contract — when reviewing an asset for listing on its platform. According to the company, it rejects 90% of the assets due to legal criteria and do not list any securities.

However, the SEC has accused Coinbase of only providing “lip service” to the idea of ​​legal compliance: “For years Coinbase has made it possible for trading of crypto assets that are investment contracts under the Howey Test and the established principles of the federal securities laws,” it states.

In the Binance lawsuit, the SEC only named BNB and BUSD as securities.

The SEC’s third allegation relates to Coinbase’s staking-as-a-service product, which the exchange has not registered with the commission. The program allows users to share their Proof of Stake crypto assets through the Coinbase platform and earn a return, while Coinbase takes a commission of 25-35%.

The agency had already targeted the “BNB Vault”, “Simple Earn” and “Staking” schemes available through Binance US on Monday. Securities regulators at the state level also started targeting Coinbase for staking producers on Tuesday, including Alabama, California, and more.

Various penalties

Coinbase was ordered to repay all “ill-gotten gains” related to the securities violations, along with prejudice interest, civil financial penalties, and other forms of equitable relief for investors. when kraken Settlement Due to charges with the Securities and Exchange Commission in February for issues related to the staking product alone, it had to pay a $30 million fine.

Binance was ordered to pay similar fines, but was also ordered to permanently ban it from engaging in the securities and cryptocurrency exchange business.