Coinbase May Face Cease & Desist Orders From 10 States Following SEC’s Lawsuit
- Ten US states have issued show cause orders to Coinbase in parallel action to the SEC’s lawsuit.
- The Alabama Securities Commission has given Coinbase 28 days to respond to the allegations of selling unregistered securities.
- The SEC charged the crypto giant for operating as an unregistered securities exchange in the United States.
- Coinbase’s share price has tanked more than 20% in premarket trading following the lawsuit.
The legal back and forth between the largest crypto exchange in the United States and the country’s top securities regulator has culminated in the filing of a lawsuit against Coinbase in New York federal court. The SEC has charged the firm for operating as an unregistered securities exchange, broker, and clearing agency. The regulator also charged the crypto exchange for selling unregistered securities through its staking service. In a parallel action, the Alabama Securities Commission has issued a show cause order to Coinbase.
Coinbase Stock Drops 20%
The Alabama Securities Commission (ASC) has given Coinbase 28 days to show cause why they should not be ordered to cease and desist from selling unregistered securities in the state. The ASC’s latest action is the result of a multi-state task force of ten state securities regulators including California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington, and Wisconsin. According to a press release by the ASC, Coinbase has been accused of violating securities law by offering its staking rewards program accounts to the state’s investors.
News of the ASC’s show cause order broke soon after the SEC announced that it had sued Coinbase for operating its crypto-asset trading platform as an unregistered exchange and for failing to register offers and sales of its staking program. As per the SEC’s complaint, the crypto exchange deprived its investors of disclosures and protections that come from registration, exposing them to significant risk. The securities regulator named 13 crypto assets offered on Coinbase as securities, namely SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH, and NEXO.
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.”
The SEC’s lawsuit against Coinbase prompted the company’s stock to drop more than 20% in premarket trading. The share price recovered slightly after market open and is currently trading at $48.8. On one hand, the SEC’s lawsuit alleged that Coinbase operated as an unregistered broker since 2019. On the other hand, the U.S. government has used the crypto exchange to sell billions worth of BTC since 2019. The company’s Chief Legal Officer Paul Grewal is set to testify before the U.S. House Committee on Agriculture later today.
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