The new lawsuit against Coinbase comes just hours after the SEC sued Binance for violating the same US securities rules.
US-listed cryptocurrency trading platform Coinbase Global Inc (NASDAQ: COIN) is under the radar of the US Securities and Exchange Commission (SEC) once again.
This time, it was Coinbase Accused in federal court in New York earlier today for acting as an unregistered national securities exchange and broker pursuant to the regulator. The lawsuit stated that Coinbase has operated this way since at least 2019 when it began conducting cryptocurrency transactions.
Coinbase Prime and Coinbase Wallet are named as two products that the company has leveraged to attract investors.
The self-protected Coinbase Wallet has been recognized to help investors access liquidity outside of the Coinbase platform and according to a Twitter post by SEC Chair Gary Gensler, this “denies investors important protections, including rulebooks that prevent fraud and manipulation, proper disclosure, and safeguards against Conflict of interest and routine inspection.
Also, the regulator has defined the Coinbase staking service as an investment contract and unregistered securities, similar to the crime and fees levied on cryptocurrency exchange Kraken earlier in the year. Specifically, staking has been described as a way for investors to make a profit through Coinbase’s administrative efforts.
Therefore, the SEC requires that the company be permanently restricted and prevented from doing so in the future.
Coinbase and the SEC are still in Loggerheads
It should be noted that Coinbase and the SEC have been at each other’s ire for quite some time, especially in terms of regulation for the nascent industry.
About two months ago, the US stock exchange received Wells’ notice from the regulator. According to the notice, the SEC claimed to have identified potential violations of US securities law and, accordingly, planned to impose actions on the exchange. During that time, Coinbase made it clear that none of its listed assets were securities.
Thus, Coinbase Chief Legal Officer Paul Grewal said:
“If necessary, we would welcome legal action to provide the clarity we have been advocating for and to establish that the Commission simply was not fair or reasonable when it came to its involvement in digital assets. Until then, business continues as usual.”
The new lawsuit against Coinbase comes just hours after the same regulator sued leading digital asset service provider Binance for violating the same US securities rules. Binance has been accused of mismanaging client funds and misleading investors and regulators alike. This is in addition to violating Know Your Customer (KYC) rules by allowing Americans to trade on the platform after declaring that they were not allowed to do so.
Just as Coinbase did previously, Binance has called out the Securities and Exchange Commission (SEC) for failing to provide clarity on crypto regulation. In response to the lawsuit, the leading trading platform announced that it is ready to defend its position in court. However, the lawsuit has already done some damage to the crypto market, causing many digital assets to decline.
Coinbase shares fell 9% after the Binance-SEC lawsuit was announced, and now a newly filed lawsuit against Coinbase has sent the stock down 13%.
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Benjamin Godfrey is a blockchain enthusiast and journalist who enjoys writing about real-world applications of blockchain technology and innovations to drive public acceptance and global integration of the emerging technology. His desires to educate people about cryptocurrencies have inspired his contributions to popular blockchain-based media and websites. Benjamin Godfrey is a fan of sports and farming.
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