The SEC sued Coinbase for acting as an unregistered broker.
Wall Street’s top regulator is facing some of the biggest names in crypto in a regulatory crackdown that has rocked the digital asset sector, accusing them of violating US securities laws.
On Tuesday, the US Securities and Exchange Commission sued Coinbase, the largest US crypto exchange, for allegedly acting as an unregistered broker. That complaint landed less than 24 hours after it was filed A similar case against foreign competitor Finans.
“Since at least 2019, Coinbase has made billions of dollars illegally buying and selling crypto asset securities,” the SEC said. Press release. “Coinbase combines the traditional services of an exchange, broker and settlement agent without registering with the Commission as required by law.”
Coinbase’s failure to register “deprived investors of significant protections,” the SEC said.
Coinbase CEO Brian Armstrong said in a tweet on Tuesday that he was “proud to represent the industry in court to finally get some clarity on crypto rules.” But he pushed back against the SEC, which he noted recognized the crypto platform’s business when it allowed Coinbase to go public in 2021.
“There was no way to ‘come in and register’ – we tried again and again.” He wrote. “Instead of issuing a clear rulebook, the SEC has taken a regulation that harms America through an enforcement approach. So if the courts must be used to seek clarity, so be it.
In a statement to CNN, Coinbase’s chief legal officer Paul Grewal echoed Armstrong’s statement, adding: “Legislation that allows fair rules of the road to be openly created and applied equitably is the solution, not the lawsuit.”
Shares of Coinbase fell more than 12% on Tuesday.
The Coinbase case comes on the heels of a similar SEC complaint against Binance, the world’s largest crypto exchange. In the 24 hours after the company sued Binance, investors pulled about $790 million from the platform and its US subsidiary, data firm Nansen said on Tuesday.
I saw Binance Net outflows were $778.6 million Crypto tokens on the Ethereum blockchain, along with its American subsidiary Binance.US, record a net outflow of $13 million, Nansen tweeted.
A spokesperson for Binance on Monday said the company is taking the SEC’s allegations seriously, but believes the agency’s allegations are “unjustified” and that the company is being targeted because of its size and name recognition.
The growing regulatory crackdown is surprising crypto investors, who were shocked by last year’s explosion of FTX, a rising star that burned spectacularly and is now a commodity. A massive federal fraud investigation. Since then, digital asset prices have fallen and regulators have stepped up scrutiny of the industry.
Crypto companies have long resisted classifying their products as traditional securities or commodities, arguing that they are an entirely new type of digital asset that requires bespoke rules and regulations. The SEC disagrees, and has often said that most crypto offerings are securities that should be regulated like stocks and bonds on Wall Street.
Lawsuits against two of the biggest names in crypto could help force the regulatory issue by prompting Congress to act and eventually judicial reviews.
“This case may not be positive for Coinbase, but it should be positive for the crypto space,” analysts at TD Cowen wrote on Tuesday. “Regardless of how the judge rules, crypto should stay close to the final rules down the road.”
— CNN’s Matt Egan contributed reporting.