The SEC lawsuit alleges that Coinbase operated as an unregistered broker and several tokens offered on its platform qualify as security.
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The United States Securities and Exchange Commission has filed a lawsuit against New York-based crypto exchange Coinbase for offering unregistered securities.
The SEC lawsuit alleged that Coinbase has never registered as a broker, national securities exchange or clearing agency, evading the disclosure scheme for securities markets. SEC alleged that several tokens offered by the crypto exchange including Solana (SOL), Cardano (ADA), Polygon (MATIC) Filecoin (FIL), Sandbox (SAND), Axie Infinity (AXS), Chiliz (CHZ), FLOW, ICP, NEAR, VGX, DASH, and NEXO qualify as securities.
The lawsuit further alleged that Coinbase has been operating as an unregistered security broker since 2019, almost two year before its initial public offering (IPO) in April 2021.
The lawsuit alleged that coinbase’s staking program includes five stackable crypto assets, making the staking program an investment contract and therefore a security. Coinbase was already fighting the staking battle with the SEC and had claimed its staking products do not qualify as a security, despite Kraken settling with the SEC and winding down its s
SEC chief Gary Gensler while addressing the latest Coinbase lawsuit said that the crypto exchange allegedly deprived its customers of critical protections that prevent fraud and manipulation, and avoided proper disclosure, and safeguards against conflicts of interest.
Coinbase share price dropped by 15% in pre-trading after SEC announced its lawsuit on June 6.
Coinbase share price movement. Source: Google
The SEC lawsuit against Coinbase comes just a day after the securities regulator sued Binance for violating securities law and comingling customer’s funds. While Binance was charged with 13 counts of violations under various securities laws, the allegations against Coinbase have puzzled many in the crypto industry primarily because Coinbase is a publicly listed company,
Many in the crypto community questioned how Coinbase was allowed to go public in 2021 when it has been operating as an unregistered security broker. One crypto influencer that goes by the Twitter name of The Wolf said, SEC suing Coinbase could cut some slack for Binance as well.
This is a developing story, and further information will be added as it becomes available.
Source: cointelegraph.com