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SEC Continues Crypto Crackdown: Sues Coinbase for Offering Securities

For the second time in two days the SEC is targeting one of the world’s biggest crypto exchanges for violating federal securities law.

The SEC is suing Coinbase for operating as an unlicensed securities exchange. Coinbase is the only publicly listed crypto exchange in the USA.

The news comes just one day after the company made a similar complaint against Coinbase rival Binance.

Specifically the suit alleges that Coinbase operated as an unregistered broker, exchange and clearing house for customers. It named Coinbase Inc. and Coinbase Global Inc. as defendants but not founder and CEO Brian Armstrong.

Interestingly crypto prices actually rebounded today after experiencing a significant drop after the Binance news broke yesterday. On the other hand Coinbase stock is down more than 20% at the time of publication.

Coinbase Logo on phone

SEC: Coinbase Failed to Register Properly

The SEC has long argued that crypto exchanges offer securities and should be under the purview of the organization.

The suite breaks it down by claiming that Coinbase has operated as a broker, exchange and clearing house for customers. According to the SEC those services were “commingled”:

“The Coinbase Platform merges three functions that are typically separated in traditional securities markets – those of brokers, exchanges, and clearing agencies,” the SEC suit said. “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.”

SEC Chair Gary Gensler would go on to say that Coinbase’s alleged failures deprive customers of critical protections.

As expected the SEC also took issue with Coinbase’s staking products. That is perhaps the least surprising part of the suit considering the SEC issued a Wells Notice to Coinbase in regards to staking earlier this year.

Also, it was notably that the SEC did not accuse Coinbase of commingling customer funds as it did with Binance yesterday.

Coinbase: “We’re Proud to Represent Our Industry in Court”

There is one major problem for SEC with its case against Coinbase: It reviewed the company and allowed it to become public in 2021.

Coinbase CEO Brian Armstrong noted this in an immediate response to the suit on Twitter:

“Regarding the SEC complaint against us today, we’re proud to represent the industry in court to finally get some clarity around crypto rules.


  1. The SEC reviewed our business and allowed us to become a public company in 2021.
  2. There is no path to “come in and register” – we tried, repeatedly – so we don’t list securities. We reject the vast majority of assets we review.
  3. The SEC and CFTC have made conflicting statements, and don’t even agree on what is a security and what is a commodity.
  4. This is why the US congress is introducing new legislation to fix the situation, and the rest of the world is moving to put clear rules in place to support this technology.

Instead of publishing a clear rule book, the SEC has taken a regulation by enforcement approach that is harming America. So if we need to avail ourselves of the courts to get clarity, so be it.

Btw, in case it’s not obvious, the Coinbase suit is very different from others out there – the complaint filed against us is exclusively focused on what is or is not a security.  And we are confident in our facts and the law.

We’ll get the job done. In the meantime, let’s all keep moving forward and building as an industry. America will get this right in the end.”

Coinbase also released a short video that pointed out some of the other inconsistencies with the SEC’s actions:

SEC Adds ICP, NEAR to List of Securities

Because no one knows exactly which tokens the SEC deems as securities, crypto experts are taking note of every token mentioned in the complaints.

Yesterday the action against Binance mentioned the following coins as securities:

  • Solana (SOL)
  • Cardano (ADA)
  • Polygon (MATIC)
  • Coti (COTI)
  • Algorand blockchains (ALGO)
  • Filecoin network (FIL)
  • Cosmos hub (ATOM)
  • Sandbox platform (SAND)
  • Axie infinity game (AXS)
  • Decentraland (MANA)

The case against Coinbase included most of those tokens but also added Chiliz (CHZ), Flow (FLOW), Internet Computer (ICP), Near (NEAR), Voyager (VGX), Dash (DASH) and Nexo (NEXO).

Bitcoin and Ethereum were notably absent from both suits.

Crypto Reaction

Over the last six months every major crypto exchange that operates out of the USA has been targeted by the SEC in some capacity.

It’s hard to say exactly what impact all these suits will have on crypto’s long-term future in the USA but at least some crypto proponents believe this is the SEC taking its best shot and there’s plenty of recourse available for the industry.

Blockchain Association Chief of Policy Officer Jake Chervinsky outlined it as follows on Twitter:

Jake Tweet 1

Jake 2

Jake 3

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Arthur Crowson

About the Author

Arthur Crowson

Arthur Crowson is an award-winning writer and editor who hails from the Pacific Northwest. His career began in traditional news media but he transitioned to online media in the mid-2000s and has written extensively about the online poker boom and the rise of cryptocurrency.

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