SEC filed charges against Coinbase, alleging that the company violated securities regulations.
SEC Filed Charges Against Coinbase On June 6
The U.S. Securities and Exchange Commission (SEC) made charges against Coinbase on June 6, accusing the company of violating securities regulations. Here are the key points from those charges:
- Unregistered Broker Operation: The SEC alleges that Coinbase’s main trading platform has been operating as an unregistered broker, exchange, and clearing agency since 2019. It also claims that Coinbase’s Prime and Wallet services have acted as unregistered brokers during that period. The SEC emphasizes Coinbase’s focus on its own revenue rather than investor interests and compliance with the law.
- Third-Party Listings: The charges primarily revolve around Coinbase providing access to crypto asset securities. The SEC argues that this puts Coinbase within the scope of securities laws. The tokens involved in the case include Solana (SOL), Cardano (ADA), Polygon (MATIC), Filecoin (FIL), The Sandbox (SAND), Axie Infinity (AXS), Chiliz (CHZ), FLOW (FLOW), Internet Computer Protocol (ICP), Near Protocol (NEAR), Voyager (VGX), Dash (DASH), and Nexo (NEXO).
- Staking Services as Securities: According to the SEC, Coinbase’s staking service is considered an unregistered securities sale and offering. Coinbase marketed the service as an investment opportunity, profited from it, created expectations of profits for users, and fulfilled the conditions for it to be classified as a security. Coinbase adjusted its staking model in March 2023, anticipating SEC scrutiny.
- Crypto Rating Council Impact: Coinbase’s increased listings starting in 2019, facilitated by the Crypto Rating Council (CRC), came under scrutiny. The SEC claims that Coinbase listed cryptocurrencies with qualities of securities, indicating compliance failures.
- Coinbase’s Stock Listing: Although Coinbase’s stock (COIN) was approved for trading by the SEC, the SEC clarifies that this does not signify an endorsement of the legality of the underlying business. The SEC also notes that Coinbase’s parent company acknowledged securities-related risks in earlier stock filings.
- Comparison with Binance’s Case: The charges against Coinbase share similarities with the SEC’s charges against Binance. However, the SEC did not level additional allegations such as allowing geoblocking bypass, engaging in fraud, permitting wash trading, or failing to separate U.S. and global operations. Binance CEO Changpeng Zhao was directly charged, unlike any Coinbase executives.
- SEC’s Demands: The SEC seeks injunctions against Coinbase and its members to prevent violations of the Securities Act and Exchange Act. It also wants Coinbase to disgorge ill-gotten gains, pay civil penalties, and leaves room for additional relief. The exact amount of penalties and disgorgement is unspecified.
The impact of these charges and demands on Coinbase’s daily operations remains unclear. Coinbase has expressed its intention to fight the SEC in court.
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