SEC Serves Coinbase in Latest Alleged Crypto Securities Violation
The SEC’s move against Coinbase marked yet another instance of enforcement actions taken against crypto operators
Artwork by Axel Rangel modified by Blockworks
The SEC served Coinbase with a Wells notice Wednesday over concerns about alleged securities violations, according to a filing.
The Wells notice, which precedes an enforcement action, states that the SEC will be targeting Coinbase’s spot market, staking service, Coinbase Prime and Coinbase Wallet. The agency moves forward with a Wells notice after it has determined laws have been violated through an investigation.
The exchange in response on Wednesday said it has “produced documents and provided two witnesses for testimony, one on the basic aspects of our staking services and one on the basic operation of our trading platform.”
The SEC declined to comment, and Coinbase pointed to its public statements and declined to comment further.
“We are confident in the legality of our assets and services, and if needed, we welcome a legal process to provide the clarity we have been advocating for and to demonstrate that the SEC simply has not been fair or reasonable when it comes to its engagement on digital assets,” Coinbase said in its response statement on Wednesday.
The exchange said it’s “confident in the legality of our assets and services, and if needed, we welcome a legal process to provide the clarity we have been advocating for.”
The SEC “simply has not been fair or reasonable when it comes to its engagement on digital assets,” according to the exchange, which added that the company “provided multiple proposals to the SEC about registration over the course of months, all of which the SEC ultimately refused to respond to.”
The Wells notice, Coinbase said, relates to an “unspecified portion” of its listed digital assets, which the company says are not securities. Even so, exchange representatives said there’s still no clear “regulatory path” toward industry compliance with the “current U.S. crypto regulatory confusion.”
“We spent millions of dollars on legal support to build these proposals and repeatedly asked for the SEC’s feedback,” Coinbase said. “We got none.”
Coinbase has met with the SEC on numerous occasions, claiming to have interacted 30 times in more than nine months — without much to show for it, in the exchange’s estimation.
“Regulatory uncertainty in the crypto industry is getting worse,” Coinbase said. “Instead of developing a regulatory framework for crypto, the SEC is continuing to regulate by enforcement only.”
The publicly traded US company said potential enforcements could incur injunctive relief, disgorgement and civil penalties, per the filing.
The notice marks the SEC’s second regulatory action against the crypto industry on Thursday. Earlier in the afternoon, the agency charged Tron network’s Justin Sun with alleged securities violations.
Updated March 22, 2023 at 7:15 PM ET: Additional context and quotes throughout.
Get the news in your inbox. Explore Blockworks newsletters:
- The Breakdown: Decoding crypto and the markets. Daily.
- 0xResearch: Alpha in your inbox. Think like an analyst.
- Empire: Crypto news and analysis to start your day.
- Forward Guidance: The intersection of crypto, macro and policy.
- The Drop: Apps, games, memes and more.
- Lightspeed: All things Solana.
- Supply Shock: Bitcoin, bitcoin, bitcoin.
