Another day, another regulatory action against a major cryptocurrency company. The has sued , the biggest crypto asset trading platform in the US. It claims that Coinbase operated as an unregistered national securities exchange, broker and clearing agency. The SEC notes that brokers, exchanges and clearing agencies are usually separated in traditional securities markets, but said Coinbase “intertwines” their services.
The agency claimed that by failing to register as a broker, national securities exchange or clearing agency, Coinbase has prevented investors from having certain protections. Those include SEC inspections, safeguards against conflicts of interest and recordkeeping requirements. The agency argued that Coinbase doesn’t qualify for any applicable exemptions from registration for any of the three functions. It accused the company of having made billions of dollars from the likes of transaction fees by “unlawfully facilitating the buying and selling of crypto asset securities” since at least 2019.
“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, the director of the SEC’s Division of Enforcement, . “As alleged , 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.”
It was reported last July that the SEC was investigating Coinbase as to whether the company illegally sold unregistered securities. As notes, news of the agency’s complaint comes on the same day that Coinbase’s chief legal officer, Paul Grewal, is set to testify before a congressional committee in relation to a new that aims to bring in some crypto regulations.
In March, Coinbase said it received a notice from the SEC that agency staff had found potential securities law violations, but it was not provided with much detail. The company also claimed it “provided multiple proposals to the SEC about registration over the course of months, all of which the SEC ultimately refused to respond to.”
On Monday, the SEC against Binance and its CEO Changpeng Zhao. The agency claimed Binance skirted its own compliance measures and lied to investors and regulators. The SEC also claimed that Coinbase . In addition, the agency is involved in against FTX founder and former CEO Sam Bankman-Fried.
Meanwhile, Coinbase is facing regulatory action at the state level. A task force comprising state regulators from Alabama, California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington and Wisconsin resulted in a Show Cause Order being issued against the exchange. spotted by , the Alabama Securities Commission accused the company of violating “the securities law by offering its staking rewards program accounts to Alabama residents without a registration to offer or sell these securities.” It gave the company 28 days to show cause why it shouldn’t be ordered to cease and desist from selling unregistered securities in the state.
This article originally appeared on Engadget at