SEC mulls lawsuit against Coinbase’s staking and spot trading
Shares in Coinbase fell 15 percent after the US Securities and Exchange Commission threatened a potential enforcement action against the crypto exchange over certain products.
Coinbase had received a letter from the SEC known as a Wells notice, escalating its crackdown on crypto firms by targeting the biggest US exchange. The legal notice serves as a warning for the company that regulators identified potential violations of federal securities laws or investor protection rules. The civil action may seek injunctive relief, disgorgement, and civil penalties, the company confirms.
The Wells notice isn’t a final decision to take a legal action against the company though, because the SEC’s commissioners must authorize any lawsuits or enforcement settlements. In particular, the agency is looking at aspects of Coinbase’s staking service Earn, as well as investment and custody services, and part of its spot trading business.
“Based on discussions with the Staff, the Company believes these potential enforcement actions would relate to aspects of the Company’s spot market, staking service Coinbase Earn, Coinbase Prime and Coinbase Wallet,” Coinbase said in a regulatory filing.
Coinbase asked the SEC specifically to identify which assets on its platforms they believe may be securities, but they declined to do so, the exchange added.
The American exchange is looking to international markets to drive growth amid fears of a looming clampdown on crypto businesses in the US. Coinbase is also facing some banking troubles after it revealed that about $240 million in corporate cash balance are stuck with the New York-based lender Signature Bank.
The Wells Notice has apparently prompted the prominent crypto exchange to consider launching a new platform overseas as part of an aggressive expansion outside the United States.
Alongside its US authorisation, Coinbase also holds licenses from Italy, the Netherlands, Ireland and Germany, as well as the UK Financial Conduct Authority. Additional registrations or license applications are in progress in several major markets, in compliance with local regulations.
That said, Coinbase could be racing offshore to keep pace with its rivals, which are gaining significant traction in territories outside the US. While Coinbase is the biggest crypto exchange in the United States, it’s facing intense competition from players like Binance.
