The SEC has officially sued crypto exchange Coinbase. In the lawsuit, the regulator claimed that the exchange allowed traders and investors to buy, sell, and trade “crypto asset securities.” The Coinbase Platform merged three functions that are typically “separated” in traditional securities markets—those of brokers, exchanges, and clearing agencies. The filing noted,
“Coinbase has never registered with the SEC as a broker, national securities exchange, or clearing agency, thus evading the disclosure regime that Congress has established for our securities markets.”
BREAKING: 🇺🇸 SEC sues Coinbase, citing the exchange is acting as an unregistered broker.— Watcher.Guru (@WatcherGuru) June 6, 2023
Rules cannot be ignored: Regulator
The SEC’s complaint has been filed in U.S. District Court for the Southern District of New York. Specifically, it alleges that Coinbase and CGI violated certain “registration provisions” of the Securities Exchange Act of 1934. Additionally, it also claimed that Coinbase violated the securities offering registration provisions of the Securities Act of 1933. In the lawsuit, the SEC specifically deemed SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH, and NEXO to be securities.
The agency also contended that Coinbase “never registered” its staking-as-a-service program as required by the securities laws. All this deprives investors of “critical protections,” according to SEC Chair Gary Gensler. Commenting on similar lines, Gurbir S. Grewal, Director of the SEC’s Division of Enforcement said that Coinbase’s “calculated decisions” might have allowed it to earn billions. However, this was done at the expense of investors. According to Grewal, today’s action seeks to hold Coinbase “accountable for its choices.” He added,
“You simply can’t ignore the rules because you don’t like them or because you’d prefer different ones: the consequences for the investing public are far too great.”
SEC’s complaint seeked “injunctive relief, disgorgement of ill-gotten gains plus interest, penalties, and other equitable relief.” The latest lawsuit comes on the heels of the Binance lawsuit that the agency filed a day back. Even the top exchange was sued on similar grounds by the SEC.