US SEC sues Coinbase over compliance one day after Binance lawsuit
The US SEC claimed that since at least 2019, Coinbase has been functioning as an unregistered broker, conducting cryptocurrency transactions without complying with disclosure requirements designed to safeguard investors.
Just one day after it sued crypto exchange Binance, the US Securities and Exchange Commission (SEC) has now filed a lawsuit against Coinbase—the largest (and public) crypto exchange in the US—for allegedly operating without proper registration.
The SEC claimed that since at least 2019, has been functioning as an unregistered broker, conducting cryptocurrency transactions without complying with disclosure requirements designed to safeguard investors.
The SEC said Coinbase "intertwines the traditional services of an exchange, broker, and clearing agency without having registered any of those functions with the Commission as required by law."
It also alleged that Coinbase Prime—a service that directs orders to various platforms—and Coinbase Wallet, which allows investors to access liquidity beyond the Coinbase platform, were also operated as unregistered brokers.
SEC sues Binance, CZ: Why the crypto exchange calls lawsuit "misguided"
In a statement, SEC Chair Gary Gensler said, "Coinbase’s alleged failures deprive investors of critical protections, including rulebooks that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspection by the SEC."
"Further, as we allege, Coinbase never registered its staking-as-a-service program as required by the securities laws, again depriving investors of critical disclosure and other protections.”
Gurbir S Grewal, Director of the SEC’s Division of Enforcement, said, "As alleged in our complaint, Coinbase was fully aware of the applicability of the federal securities laws to its business activities, but deliberately refused to follow them."
Following the announcement of the lawsuit, Coinbase's shares dropped 15.9% during pre-market trading.
The crypto sector is awaiting Coinbase's response to the lawsuit.
A day prior to suing Coinbase, the SEC sued Binance and its CEO Changpeng "CZ" Zhao, alleging that they violated federal securities laws.
As such, the lawsuit claimed that Binance, Binance.US, and Zhao offered unregistered securities in the form of BNB crypto tokens and Binance-linked BUSD stablecoins to the general public. The suit also alleged that Binance's staking service violated securities laws.
Binance responded by saying that "unilaterally labelling certain tokens and services as securities—even ones over which other US authorities have asserted jurisdiction" compounds the problem of the SEC's "misguided and conscious refusal to provide much-needed clarity and guidance to the digital asset industry."
Edited by Suman Singh