The federal lawsuit, filed Tuesday (June 6), comes one day after the Securities and Exchange Commision (SEC) took similar action against crypto giant Binance. It also marks the latest step in the agency’s ongoing conflict with Coinbase, the largest crypto platform in the U.S.
According to the suit, Coinbase has, since 2019, “made billions of dollars unlawfully facilitating the buying and selling of crypto asset securities.”
In a statement provided to PYMNTS Tuesday, Coinbase Chief Legal Officer and General Counsel Paul Grewal criticized the SEC’s “reliance on an enforcement-only approach in the absence of clear rules for the digital asset industry.”
He also said that Coinbase and companies like it have shown they are committed to compliance.
“The solution is legislation that allows fair rules for the road to be developed transparently and applied equally, not litigation,” Grewal said. “In the meantime, we’ll continue to operate our business as usual.”
The SEC’s suit argues that Coinbase’s business “intertwines the traditional services of an exchange, broker, and clearing agency” without registering those functions with the SEC, as the law requires.
In doing so, the complaint says, Coinbase has prevented investors from gaining “significant protections,” such as SEC inspections, recordkeeping requirements, and safeguards to prevent conflicts of interest.
“You simply can’t ignore the rules because you don’t like them or because you’d prefer different ones: the consequences for the investing public are far too great,” Gurbir S. Grewal, director of the SEC’s Division of Enforcement, said in a news release.
“Coinbase was fully aware of the applicability of the federal securities laws to its business activities, but deliberately refused to follow them. While Coinbase’s calculated decisions may have allowed it to earn billions, it’s done so at the expense of investors by depriving them of the protections to which they are entitled.”
PYMNTS wrote last month that the dynamics between the SEC and Coinbase had “curdled substantially” since 2022, with the SEC ramping up enforcement and Coinbase continually saying that U.S. crypto regulations are unclear.
Coinbase sued the SEC in April to force it to respond to its rulemaking petition, arguing in a court filing that it was unreasonable for the SEC — an agency with over 4,500 employees — to take nine months (and counting) to complete that simple task.”
Also last month, Coinbase unveiled an international cryptocurrency exchange to allow institutional users based in eligible jurisdictions outside of the U.S. trade perpetual futures.
“As more and more markets are moving forward with regulatory frameworks to become crypto hubs, we believe the moment is right to launch this international exchange,” the company said at the time.
The SEC’s action is part of a broader move to regulate the crypto sector, including its recent case against Binance, the largest crypto exchange in the world.
The SEC on Monday filed 13 charges against Binance and its founder Changpeng Zhao, with SEC Chair Gary Gensler alleging that Zhao and the company “engaged in an extensive web of deception, conflicts of interest, lack of disclosure and calculated evasion of the law.”
Binance replied in a blog post that it was “disappointed” with the SEC’s action and said it would “vigorously” defend its platform.
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