The U.S. Securities and Exchange Commission (SEC) filed a complaint against crypto exchange Coinbase over allegedly trading unregistered securities. According to a document filed with the Southern District of New York, the regulator claims that the crypto company failed to register with the SEC.
Just yesterday, the regulator filed a similar complaint against the world’s largest crypto exchange Binance and its CEO, Changpeng “CZ” Zhao. Today’s action represents worsening conditions for crypto companies to operate in the United States.
SEC Intensifies War Against Coinbase And Crypto
In the document filed in U.S. Federal Court, the Commission claims that Coinbase operates as a broker, exchange, and clearing agency, unlike platforms in the legacy financial sector. In that sense, the regulator claims that the company allegedly violated the “disclosure regime established” for securities markets in this country.
The Commission further claims that the crypto exchange has been allegedly violating U.S. securities laws since “at least 2019.” The complaint states the following about the charges and Coinbase’s alleged merge of functions (broker, clearing house, exchange):
By collapsing these functions into a single platform and failing to register with the SEC as to any of the three functions, and not having qualified for any applicable exemptions from registration, Coinbase has for years defied the regulatory structures and evaded the disclosure requirements that Congress and the SEC have constructed for the protection of the national securities markets and investors.
Furthermore, the Commission claims that the company has violated U.S. laws with different products, including Prime, Staking, and Wallet. Charges have been brought against Coinbase and CGI, the crypto exchange’s holding company.
SEC Enforcement Approach Unfair For Crypto?As of this writing, Coinbase or its top executives have no official response regarding the lawsuit. However, the crypto community has negatively reacted to the complaint and pointed out incongruencies in the document.
For example, Coinbase is one of the oldest exchanges operating in the world. The company was founded around 2013.
Moreover, the crypto exchange is a publicly traded company in the United States. Thus, Coinbase had to comply with requirements, documentation, financial statements, and much more to launch its Initial Public Offering (IPO).
The company debuted in the U.S. stock market on April 14, 2021, but the SEC filed their lawsuit today, over two years after this event. In addition, pseudonym crypto community member Hsaka said:
When you read through the criteria for these, they pretty much allege any coin with active socials and tokens allocated to the team, foundation, operational costs, bizdev, etc is a security. The list seems arbitrary. The Gremlins firing a thousand darts, hoping one sticks.
Cover image from Unsplash, chart from Tradingview