Coinbase Becomes SEC’s Next Target In Crypto Lawsuit Wave
The US Securities and Exchange Commission (SEC) has charged Coinbase, the country’s largest crypto trading platform, with operating illegally as it continues to widen its crackdown on the industry.
The SEC alleges that Coinbase acted as a broken, exchange, and clearing agency for investments subject to SEC rules without proper registration, allowing the company to evade oversight and safeguards against conflicts of interest.
Coinbase has responded by stating that the rules are unclear, with Chief Legal Officer Paul Grewal arguing for legislation that ensures fair and transparent rules rather than litigation.
Earlier tonight the Third Circuit issued a short order in Coinbase’s mandamus action today. The court noted the SEC’s suit against us this morning and asked the SEC whether that means the SEC has decided to deny our pending petition for rulemaking. The SEC has 7 days to respond. pic.twitter.com/8QXXoHJ07Z— paulgrewal.eth (@iampaulgrewal) June 7, 2023
Coinbase’s CEO Brian Armstrong also addressed the SEC complaint on Twitter, expressing pride in representing the industry in court to gain clarity around crypto rules.
He highlighted that the SEC has previously allowed Coinbase to become a public company, but there’s no clear path for registration.
Armstrong criticised the SEC’s “regulation by enforcement” approach and mentioned that US Congress is introducing new legislation to address the situation.
Despite the lawsuit, Coinbase plans to continue its operations as usual.
Regarding the SEC complaint against us today, we're proud to represent the industry in court to finally get some clarity around crypto rules.— Brian Armstrong 🛡️ (@brian_armstrong) June 6, 2023
1. The SEC reviewed our business and allowed us to become a public company in 2021.
2. There is no path to "come in and…
This legal action follows the SEC’s suit against Binance, the world’s largest crypto trading platform, which accused the company of mishandling customer funds, artificially inflating trading volume, and evading US regulations.
As authorities pledge to police the industry more aggressively, financial regulators from 10 states, including California and Alabama, have also filed legal actions alleging that Coinbase operates as an unregistered securities dealer.
Coinbase, founded in 2012, boasts over 100 million customers and billions of dollars in daily digital asset trading volumes.
The lawsuit has further impacted Coinbase’s shares, which fell 12%, while Nansen reported a net withdrawal of nearly $1.3 billion from the platform following the legal action.