In a recent turn of events, the US Securities and Exchange Commission (SEC) has filed a lawsuit against Coinbase for alleged securities violations. The SEC names Coinbase and its holding company, CGI, as defendants in the lawsuit, filed on June 6. This comes just a day after the SEC sued Binance over similar allegations.
According to the lawsuit, Coinbase has been operating as an unregistered exchange since at least 2019, thereby violating securities regulations. The SEC alleges that the company has functioned as an unregistered broker, an unregistered exchange, and an unregistered clearing agency, handling customer funds and assets, charging transaction-based fees, and settling its customers’ transactions.
Additionally, the commission claims that the Staking Program offered by Coinbase is in violation of the Securities Act of 1933. The program includes five stakeable crypto assets, each considered an investment contract, and therefore deemed a security.
The SEC also contends that Coinbase did not ensure the crypto assets being sold were not securities as defined by the Howey test. This is similar to the accusation made against Binance in the earlier lawsuit. The SEC states that Coinbase has been trading crypto assets that are investment contracts for years, despite acknowledging the need to comply with applicable laws.
The legal battle between Coinbase and the SEC has been ongoing, with the exchange receiving a Wells Notice earlier this year. In response, Coinbase sued the SEC, seeking regulatory clarity. However, when the court ordered the SEC to respond, the regulatory agency insisted that Coinbase could not demand such clarity.
This developing story leaves the crypto community questioning the future of the industry, with skepticism growing over the role of regulatory authorities, like the SEC, in providing that clarity. As two major cryptocurrency exchanges come under fire for alleged securities violations, it raises crucial concerns regarding the balance between innovation and compliance in the rapidly evolving world of digital assets.
Meanwhile, the conflict highlights the confusion surrounding the classification and regulation of various crypto assets by different countries and jurisdictions. As institutional investors and mainstream financial players continue to embrace this emerging asset class, crafting clear and comprehensive regulatory frameworks remains vital to ensuring investor protection and fostering innovation.
Source: Blockworks
