Coinbase, the largest U.S. crypto asset trading platform, is facing a lawsuit from the Securities and Exchange Commission (SEC) for allegedly operating as an unregistered securities exchange, broker, and clearing agency . The SEC also accuses Coinbase of failing to register its staking-as-a-service program, which allows customers to earn profits from participating in certain blockchains .
The lawsuit, filed on June 6, 2023, in the Southern District of New York, names 13 tokens that the SEC claims are securities and that Coinbase has made available for trading without proper registration . These tokens include Solana (SOL), Axie Infinity (AXS), Polygon (MATIC), The Sandbox (SAND), and Chiliz (CHZ).
The SEC alleges that Coinbase has violated the securities laws by providing a marketplace and bringing together orders for securities of multiple buyers and sellers, engaging in the business of effecting securities transactions for the accounts of customers, and providing facilities for comparison and settlement of securities transactions . The SEC also alleges that Coinbase has offered and sold its staking program without registering it as a securities offering .
Today we charged Coinbase, Inc. with operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency and for failing to register the offer and sale of its crypto asset staking-as-a-service program.https://t.co/XPG2gDkxtV pic.twitter.com/hCdVMw8B2v
— U.S. Securities and Exchange Commission (@SECGov) June 6, 2023
The SEC’s chair, Gary Gensler, said in a statement that Coinbase’s alleged failures deprive investors of critical protections, such as rulebooks that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspection by the SEC .
Coinbase has not yet responded to the lawsuit, but its CEO Brian Armstrong and chief legal officer Paul Grewal have previously denied that Coinbase lists securities or offers products that are securities. They have also expressed their frustration with the SEC’s lack of clarity and fairness when it comes to crypto assets.
The lawsuit comes one day after the SEC sued Binance, the world’s largest crypto exchange, for allegedly operating illegally in the U.S. and engaging in various other misconducts. According to data firm Nansen, over $790 million have been withdrawn from Binance and its U.S. affiliate since that lawsuit was filed.
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