SEC Sues Coinbase, One Day After Binance Lawsuit

(RTTNews) - The U.S. Securities and Exchange Commission filed a lawsuit against Coinbase Global, Inc. (COIN) on Tuesday, alleging that the leading cryptocurrency platform in the United States operated unlawfully by not registering as an exchange. This lawsuit represents another setback for the cryptocurrency industry as a whole.

Within a span of two days, the SEC has filed its second lawsuit against a major cryptocurrency exchange. The lawsuit follows the SEC's case against Binance, the largest cryptocurrency exchange globally, and its founder Changpeng Zhao.

The filing of both civil cases by the SEC is aligned with the efforts of SEC Chair Gary Gensler to establish regulatory authority over the cryptocurrency industry.

Gensler reiterated his characterization of the crypto industry as a "Wild West" that has eroded investor confidence in the U.S. capital markets. This reflects the SEC's determination to address the perceived lack of oversight and ensure investor protection in the cryptocurrency space.

In an interview with CNBC, Gary Gensler stated that the entire business model of certain cryptocurrency platforms is constructed on a foundation of noncompliance with U.S. securities laws. He emphasized the SEC's objective of urging these platforms to align with regulatory requirements and operate in compliance with the laws governing securities in the United States.

Cryptocurrency companies argue that the rules established by the SEC lack clarity, and they contend that the agency is overstepping its boundaries by attempting to regulate the cryptocurrency industry. They claim that the SEC's actions extend beyond what is necessary or appropriate for their operations.

In a statement, Paul Grewal, Coinbase's General Counsel, affirmed that the company will maintain its regular operations and emphasized its steadfast dedication to compliance.

On Tuesday, a group of ten U.S. states, spearheaded by California, alleged that Coinbase violated securities laws through its staking rewards program.

Shares of Coinbase, was down $7.43 or 12.65%, at $51.28. The shares had previously dropped by as much as 20.9%.

Following the SEC's filing, customers of Coinbase withdrew over $57 million from the platform within a few hours, according to data provided by Nansen, a data firm specializing in blockchain analytics.

According to the SEC, Coinbase engaged in trading activities involving at least 13 cryptocurrency assets that are considered securities and should have been registered. These assets include tokens like Solana, Cardano, and Polygon.

Established in 2012, Coinbase has seen significant growth and, as of recently, catered to over 108 million customers. As of March, the company held approximately $130 billion worth of customer crypto assets and funds on its balance sheet. Transactions accounted for 75% of its net revenue of $3.15 billion in the previous year.

The lawsuit filed by the SEC on Tuesday aims to secure civil fines, recover unlawfully acquired profits, and obtain injunctive relief. It should be noted that the SEC had previously cautioned Coinbase in March that charges were a possibility in the future.