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SEC sues Coinbase | Staking services are the Achilles' heel, more unregistered securities than Binance, stock price plunges 20%

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SEC sues Coinbase | Staking services are the Achilles

The U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Coinbase the day after suing Binance, citing reasons for the lawsuit. In addition, Coinbase is facing accusations from regulatory bodies in multiple U.S. states, claiming that its lending services have violated securities laws. As a result, Coinbase's stock price has plummeted by nearly 20% over the course of two days.

SEC Successively Sues Binance and Coinbase

1. SEC Lawsuit Core: Coinbase Staking Service

SEC mentioned the "Coinbase Staking Service" in the lawsuit document, stating that it is equivalent to an "investment contract" as defined in U.S. law, which Coinbase did not register for.

In addition, several cryptocurrencies offered for staking by Coinbase were also accused by the SEC of being unregistered securities.

2. Coinbase Has More Unregistered Securities Than Binance

In addition to the assets such as Solana SOL, Cardano ADA, Polygon MATIC, Filecoin FIL, Sandbox SAND, and Axie Infinity AXS listed as unregistered securities in the SEC's lawsuit against Binance, the SEC also listed:

  • Chiliz CHZ

  • Flow FLOW

  • Internet Computer ICP

  • Near NEAR

  • Voyager Token VGX

  • Dash DASH

  • Nexo NEXO

3. Coinbase Assumes Multiple Roles of Traditional Securities Institutions

SEC claims that Coinbase has taken on the roles of three separate entities in the traditional securities market and has not registered for these three businesses:

  • Exchange

  • Clearinghouse

  • Broker-dealer

4. Coinbase Wallet Also Targeted

SEC pointed out that as an unregistered broker-dealer, Coinbase, through its Coinbase Prime, acts as a cryptocurrency broker, providing orders to its platform or third-party platforms, and users can also access liquidity outside the platform through Coinbase Wallet.

Adam Cochran, a venture capitalist, commented on Twitter that he finds the SEC's accusation of defining the wallet as a broker-dealer because Coinbase Wallet can access DeFi services to be quite absurd.

Coinbase Faces Accusations of Violating Securities Laws by Multiple State Regulators

In addition to the SEC's accusations, the Alabama Securities Commission (ASC) and special task forces from nine other states have accused Coinbase's staking services of violating securities laws in states including:

  • California

  • New Jersey

  • Washington

  • Vermont

  • Kentucky

  • Maryland

  • Illinois

  • Wisconsin

  • South Carolina

The California Department of Financial Protection and Innovation (DFPI) and Maryland have applied to prohibit Coinbase from continuing to sell securities in California.

ASC's statement stated that the show-cause order does not prohibit Coinbase from offering staking services as long as Coinbase can demonstrate that this product fully complies with Alabama law, with Coinbase having only 28 days left to explain.

Coinbase Responds to SEC

Coinbase CEO Brian Armstrong expressed frustration in a tweet, especially since the SEC had reviewed Coinbase's business in 2021 and allowed Coinbase to become the world's first publicly listed cryptocurrency exchange, only to now bring forth conflicting accusations. He mentioned the following:

  • The SEC reviewed our business in 2021 and allowed us to become a publicly listed company.

  • The phrase "please register" has no viable path - we have tried multiple times. We will not list securities and have refused to list most of the digital assets we have reviewed.

  • The statements of the SEC and CFTC conflict with each other, and there is no consensus on what constitutes a security or commodity.

  • This is why the U.S. Congress is working on new legislation to address this situation, while other countries are also creating clear rules to support this technology.

Coinbase Plunges by 18%

Coinbase's stock price had already dropped by 11.9% the previous day due to Binance's lawsuit, and the following day, it faced a lawsuit from the SEC, resulting in a total decline of 18.57% in just two days.

Despite the SEC listing more tokens as unregistered securities in its lawsuit against Coinbase and the market being affected, the mentioned tokens did not experience significant declines overall due to the rise in the Bitcoin market.