The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against U.S. crypto exchange Coinbase (COIN) for allegedly violating federal securities law. This comes a day after the SEC filed a similar suit against Binance. According to the SEC, Coinbase has been operating as an unregistered broker, exchange, and clearing agency simultaneously. SEC Chair Gary Gensler said in a press release that these different functions were “commingled.”
“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,” Gensler said.
In response, Coinbase Chief Legal Officer Paul Grewal called for crypto-specific legislation to be developed. “The SEC’s reliance on an enforcement-only approach in the absence of clear rules for the digital asset industry is hurting America’s economic competitiveness and companies like Coinbase that have a demonstrated commitment to compliance. The solution is legislation that allows fair rules for the road to be developed transparently and applied equally, not litigation. In the meantime, we’ll continue to operate our business as usual,” he said.
The SEC pointed to Coinbase’s Prime, Wallet, and staking products, as well as the actual tokens it lists, as areas where it violated federal securities laws. The SEC identified tokens issued by foundations and companies or tied to protocols including Solana (SOL), Cardano (ADA), Polygon (MATIC), Sandbox (SAND), Filecoin (FIL), Axie Infinity (AXS), Chiliz (CHZ), Flow (FLOW), Internet Computer (ICP), Near (NEAR), Voyager (VGX), Dash (DASH), and Nexo (NEXO) as securities in the suit.
The SEC alleged that Coinbase violated the Exchange Act through its failure to register across four different counts, as well as violated the Securities Act, and is seeking to “permanently enjoin” the company from continued violations and force disgorgement and civil penalties.