Following the Securities and Exchanges Commission’s (SEC) lawsuit, US-based crypto exchange Coinbase has received multiple Show Cause orders from US states. The Alabama Securities and Exchange Commission (ASC) and ten other US states have filed charges against Coinbase for violating securities laws. These states include Kentucky, Illinois, California, South Carolina, Washington, Vermont, Maryland, Wisconsin, New Jersey, and Alabama. Coinbase now has 28 days to prove why they shouldn’t cease operating in these 11 US states.
The SEC announced the lawsuit against Coinbase on June 6, accusing the crypto exchange of operating as an unregistered securities exchange, broker, and clearing agency. Allegedly, Coinbase violated securities laws by offering several digital assets not duly registered under the Securities Exchange Act of 1934 and 1933. The SEC filed its complaint in the US District Court for the Southern District of New York, seeking injunctive relief, disgorgement of ill-gotten gains plus interest, penalties, and other equitable relief.
The SEC recognized the assistance from the multi-state task force of ten state securities regulators, led by California. According to these state regulators, Coinbase operated some staking programs for residents in the 11 states without registering the underlying cryptocurrencies under US laws. It’s important to note that the Alabama State Securities (ASC) officials clarified they did not prohibit Coinbase and other firms from offering staking services, but they must comply with state laws.
The multiple Show Cause Orders gave Coinbase a 28-day mandate to present reasonable facts that its offerings are not unregistered securities. Failure to do so will force Coinbase to cease operating in the mentioned states.
Amanda Senn, the Director of the ASC, expressed the state regulator’s commitment to protecting Alabama consumers and investors, including those investing in the decentralized finance space. Furthermore, she emphasized that their action is a step towards ensuring that crypto investors have the same protection under US laws as other investors. The California Department of Financial Protection and Innovation (DFPI) also provided factual background for their accusations against the exchange. According to their estimates, Coinbase has been offering and selling unregistered securities since November 2019.
The cryptocurrency market was already under scrutiny due to the SEC’s lawsuit against Binance and its CEO on June 5 for violating US securities laws. Even more concerning is the SEC’s long list of crypto assets offered on Coinbase, which the regulator has tagged as “unregistered securities” offerings. After the news of the lawsuit broke out on June 6, Nasdaq-listed Coinbase shares (COIN) declined over 12% and closed at $51.61 compared to the June 5 closing price of $58.705. However, its price has since recovered slightly by 2.88% and now trades at $53.09.
Source: Cryptonews
