June 6, 2023 at 14:41 GMTModified date: June 6, 2023 at 14:43 GMT
June 6, 2023 at 14:41 GMT

SEC v Coinbase: 10 other US states now join the legal action

The U.S. Securities and Exchange Commission has cracked the whip for a second day — this time targeting Coinbase. And now it’s been reported that 10 US states have joined the legal action.

Coinbase. Pic: Shutterstock

The U.S. Securities and Exchange Commission has cracked the whip for a second day — this time targeting Coinbase.

One day after filing a lawsuit against the Binance exchange and its CEO Changpeng Zhao, the SEC is now alleging that Coinbase has operated illegally without having first registered with the regulator.

The SEC has also named several other tokens as securities in the Coinbase lawsuit, including SOL, ADA, MATIC, FIL, NEAR, VGX, DASH, SAND, ICP, NEXO, AXS, CHZ and FLOW.

The SEC has stated: “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.”

SEC Chair Gary Gensler added: “We allege that Coinbase, despite being subject to the securities laws, commingled and unlawfully offered exchange, broker-dealer, and clearinghouse functions. In other parts of our securities markets, these functions are separate.

“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, chimed in with: “You simply can’t ignore the rules because you don’t like them or because you’d prefer different ones: the consequences for the investing public are far too great.”

Ten other US states join the Coinbase heat

To add to Coinbase’s woes, other US states are now joining in to pile on legal pressure on the crypto exchange.

According to a statement published today by the Alabama Securities Commission, a multi-state regulatory team comprising of state regulators from Alabama, California, Illinois, Kentucky, Maryland, New Jersey, South Caroline, Vermont, Washington, and Wisconsin have issued a Show Cause Order against Coinbase. 

The order alleges that: “Coinbase violates the securities law by offering its staking rewards program accounts to Alabama residents without a registration to offer or sell these securities.”

The order gives the exchange 28 days to show cause why Coinbase should not be directed to cease and desist from selling unregistered securities in Alabama. 

At the time of writing, the global crypto market is down 3.05% to $1.1tn. The BTC price is trading at $25,992, down 2.99% in the past day.