The SEC has filed a lawsuit against Coinbase, alleging that the company operates as an unregistered securities exchange, broker, and clearing agency.
The United States Securities and Exchange Commission (SEC) has filed a lawsuit against Coinbase, a prominent crypto exchange based in New York, alleging that the platform offered unregistered securities. The SEC’s lawsuit claims that Coinbase has not registered as a broker, national securities exchange, or clearing agency, thus evading the necessary disclosure requirements for securities markets.
According to the lawsuit, the SEC argues that several tokens listed on Coinbase, including
- Solana (SOL)
- Cardano (ADA)
- Polygon (MATIC)
- Filecoin (FIL)
- Axie Infinity
- Chiliz (CHZ)
- DASH and
- NEXO, should be classified as securities. The SEC asserts that Coinbase has been operating as an unregistered security broker since 2019, a significant period preceding its initial public offering (IPO) in April 2021.
One specific point of contention raised in the lawsuit is Coinbase’s staking program. The SEC claims that the program, which allows users to earn rewards by holding certain cryptocurrencies, constitutes an investment contract and therefore qualifies as a security. Coinbase has previously disputed this classification, even as the SEC settled with another exchange, Kraken, resulting in the discontinuation of its staking services in the United States.
The SEC’s legal action against Coinbase comes just a day after it filed a lawsuit against Binance, a leading global crypto exchange, for alleged violations of securities laws and the commingling of customer funds. The nature of the allegations against Coinbase has raised eyebrows within the crypto industry, particularly because Coinbase is a publicly listed company.
In response to the lawsuit, Binance CEO Changpeng Zhao took to Twitter to express his thoughts and indirectly criticize the SEC. The legal actions against both Coinbase and Binance highlight the increased regulatory scrutiny faced by cryptocurrency exchanges and their compliance with securities laws.