Early Tuesday morning, cryptocurrency exchange Coinbase found itself at the center of regulatory scrutiny, receiving a Show Cause Order from the Alabama Securities and Exchange Commission (ASC), as well as ten other states. A multi-state task force including California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington, and Wisconsin has filed charges against the exchange for allegedly violating securities laws.
The SEC has launched a new lawsuit against Coinbase, accusing the company of acting as an unregistered exchange, broker, and clearing agency. This development came to light in a press release, where it was also noted that the authorities appreciated the assistance provided by the task force. According to the regulatory bodies, Coinbase offered specific staking programs to residents in these eleven states without proper registration to sell cryptocurrencies – or securities, as per the U.S. Government’s classification.
While Coinbase and other companies are not banned from offering staking, they must adhere to state laws, as per ASC officials. The Show Cause Order allows Coinbase 28 days to prove they are not selling unregistered securities. Thus, they must “show cause” as to why they should not be directed to cease and desist operations in these states.
Amanda Senn, Director of the ASC, expressed the agency’s commitment to protecting Alabama consumers and investors, including those in the decentralized finance space. She regards this action as a step towards ensuring that crypto asset product investors receive the same protections under the law.
The Department of Financial Protection and Innovation for California supplied additional background information, estimating that Coinbase has been involved in offering and selling unregistered securities since November 2019. This news arrived on the heels of a tumultuous day for the cryptocurrency markets, with Binance – the world’s largest cryptocurrency exchange – and its CEO Changpeng Zhao being sued by the SEC for allegedly violating U.S. securities laws.
Despite these legal challenges, it’s essential to recognize that increased regulation could help foster greater transparency and legitimacy in the cryptocurrency space. However, heightened scrutiny could also negatively impact innovations and investments in the sector. In light of these coordinated actions, Coinbase’s shares (trading as COIN on the Nasdaq) have fallen by over 13%, with the current trading price at $50.68.
Source: Decrypt
