Breaking: Coinbase Sued by SEC Just a Day After Binance Lawsuit – Which Firm is Next?

The US Securities and Exchange Commission threw a one-two punch to cryptocurrency exchanges this week, charging yet another exchange, Coinbase, Inc., on Tuesday.

The regulator said that Coinbase was operating its platform and was not registered in the capacity of an exchange, broker or clearing agency, according to a press release. 

The regulator also charged the US crypto exchange for the unregistered offer and sale of securities related to its staking-as-a-service program. 

The SEC did not charge Coinbase executives in the lawsuit. 

“We allege that Coinbase, despite being subject to the securities laws, commingled and unlawfully offered exchange, broker-dealer, and clearinghouse functions,” said SEC Chair Gary Gensler in a statement.

Those functions are separate in other parts of the securities markets, Gensler added.

“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,” said Gurbir S. Grewal, director of the SEC’s Division of Enforcement. 

"As alleged in our complaint, Coinbase was fully aware of the applicability of the federal securities laws to its business activities, but deliberately refused to follow them.”

The regulator also named 13 cryptocurrencies as securities, according to the complaint. 

"Throughout the Relevant Period, Coinbase has made available for trading crypto assets that are being offered and sold as investment contracts, and thus as securities. This includes, but is not limited to, the units of each of the crypto asset securities further described below—with trading symbols SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH, and NEXO—(the 'Crypto Asset Securities')," the SEC said.

Some of those coins were also labeled as securities in the SEC's lawsuit against Binance on Monday. 

“The SEC's reliance on an enforcement-only approach in the absence of clear rules for the digital asset industry is hurting America’s economic competitiveness and companies like Coinbase that have a demonstrated commitment to compliance," said Paul Grewal, chief legal officer at Coinbase, in an emailed statement. "The solution is legislation that allows fair rules for the road to be developed transparently and applied equally, not litigation. In the meantime, we’ll continue to operate our business as usual." 

The SEC Crackdown continues

This comes just one day after the regulator sued Binance and its CEO Changpeng Zhao over 13 charges. 

Binance Holdings Ltd., and its US affiliates, were charged on Monday by the SEC for a slew of different charges, from allegedly operating as an unregistered exchange to offering unregistered securities. 

Coinbase is also facing an ongoing feud with a US regulator after it was served a Wells notice in March over some of its products. 

A Wells notice means that the US Securities and Exchange Commission is ready to recommend formal charges to its five-member commission. 

SEC Chair Gary Gensler has called on exchanges to register and recently said this month that they tend to be “rife with conflicts.” 

Updated at 8:48 a.m. ET to include cryptocurrencies named securities by the SEC and add that Coinbase executives had not been charged. 

Updated at 10:14 a.m. ET to include a statement from Coinbase Chief Legal Officer Paul Grewal