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06 Jun 2023

Coinbase sued by SEC one day after regulator sues Binance

The United States Securities and Exchange Commission has struck again — this time suing Coinbase — one day after filing a lawsuit against exchange rival Binance. The regulator alleges that Coinbase violated securities laws.

It also named several tokens as securities in the lawsuit. Those tokens include SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH, and NEXO.

The Coinbase lawsuit is not a surprise, as the SEC issued the company a Wells notice — a formal notification informing individuals or companies that the SEC intends to bring an enforcement action against them — in March. Coinbase had sued the SEC, telling a court that its petition for a response about new digital-asset regulation was still warranted. At the time, the crypto exchange also said that the SEC had already decided to deny its request for new rules.

In its lawsuit, the SEC said Coinbase merges three functions typically separated in traditional securities markets: brokers, exchanges, and clearing agencies. “Yet, Coinbase has never registered with the SEC as a broker, national securities exchange, or clearing agency, thus evading the disclosure regime that Congress has established for our securities markets,” the regulator noted.

First Binance, now Coinbase

The Coinbase lawsuit comes a day after the SEC sued rival Binance, its co-founder and CEO Changpeng Zhao and its American affiliate, Binance.US.

Yesterday, after the Binance lawsuit news, Fireblocks' Chief Legal & Compliance Officer, Jason Allegrante, warned that “all exchanges operating in the United States should now consider themselves on notice that they, too, could be subject to securities law enforcement if they continue to make these tokens available to trade” — referring to the tokens the SEC declared securities in the Binance lawsuit.

The detailed allegation by the SEC that several widely circulating digital assets are securities is interesting and can impact exchanges and users based in the U.S., according to Allegrante. “In an ideal world, customers would exit non-compliant venues and move towards better, safer exchanges. Unfortunately, U.S. customers are going to quickly run out of U.S.-based options,” he said.

This article has been updated to provide more information and context.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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