Agency follows up on Binance complaint with case that accuses largest U.S. crypto exchange of registration infractions, including 13 digital assets.
A year of tension between the largest U.S. crypto exchange CoinbaseCOIN and the Securities and Exchange Commission came to a head on Tuesday when the regulator sued the company for violation of securities laws, the agency’s second action against a major crypto exchange this week.
As with Binance on Monday, the SEC complained that Coinbase had failed to register as a securities exchange, broker and clearing house as required by law, and it also alleged that at least 13 of the roughly 254 cryptocurrencies available on Coinbase are securities.
Coinbase, which had been warned in March that it might be subject to an enforcement action, took the news in stride. The company has insisted that the SEC has not provided it with a way to become compliant with its registration requirements, even though the agency approved its business model before it sold shares two years ago.
“We’re proud to represent the industry in court to finally get some clarity around crypto rules,” CEO Brian Armstrong wrote in a Twitter post on Tuesday. “Instead of publishing a clear rule book, the SEC has taken a regulation by enforcement approach that is harming America. So if we need to avail ourselves of the courts to get clarity, so be it.”
Armstrong said the agency reviewed Coinbase’s business in 2021 and allowed it to become a public company. He adds that Coinbase has tried to work with the regulator. “There is no path to “come in and register” – we tried, repeatedly – so we don’t list securities. We reject the vast majority of assets we review,” he wrote. Coinbase went public in April 2021. Its shares are trading at $51.62, down 86% from its $381 IPO price.
“If Coinbase couldn’t make it work and nobody else can make it work, then I’m not sure that there are any demands that the SEC is making that can be met to keep platforms in the U.S.,” says Philip Moustakis, partner at Seward & Kissel who specializes in government enforcement and cryptocurrencies.
The SEC has been steadily increasing the number of cryptocurrencies that it considers securities since an insider-trading case last summer that involved a former Coinbase employee identified nine tokens that way. Shortly before that, Gary Gensler, who chairs the SEC said the only cryptocurrency he felt comfortable identifying as a commodity–rather than a security–was bitcoin.
The 13 tokens named in the Tuesday suit against Coinbase have a combined market value of $37 billion, with Cardano’s ada accounting for $12 billion, or almost a third of the total. In the insider case last year, the nine tokens identified as securities had an aggregate value of only $325 million.
The Tuesday action involves higher-profile assets that besides ada include sol on the SolanaSOL blockchain, matic (PolygonMATIC), fil (FilecoinFIL), sand (Sandbox), axs (Axel Infinity), chz (ChilizCHZ), flow (FlowFLOW), icp (Internet Computer Price), near (Near), vgx (Voyager), dash (DashDASH) and nexo (Nexo).
This article was first published on forbes.com and all figures are in USD.
