WASHINGTON–The Securities and Exchange Commission has filed suit against Coinbase, the largest crypto trading platform in the United States, claiming the company broke the law by not registering as a broker.
The action comes just a day after the SEC alleged an “extensive web of deception” at Binance, the world’s biggest cryptocurrency trading exchange, of mishandling customer funds and lying to American regulators and investors about its operations.
“With these federal actions against major crypto companies, along with other lawsuits at the state level, regulators have sought to reshape the crypto sector by treating digital asset exchanges like more traditional financial firms, while pushing out individuals and companies that they view as bad actors,” noted the New York Times in its analysis.
In its filing, the SEC said Coinbase’s leaders demonstrated they knew how the marketing and sale of digital assets should be governed under U.S. laws, even while failing to follow them.
“Coinbase has elevated its interest in increasing its profits over investors’ interests, and over compliance with the law and the regulatory framework that governs the securities markets and was created to protect investors and the U.S. capital markets,” the filing said.
Coinbase went public in April 2021, an event seen as a milestone in crypto’s march into the mainstream. The company handled $830 billion worth of trades last year, with nearly nine million users making at least one trade per month, according to the Times.
The Allegations
Its complaint, filed in federal court in Manhattan, the SEC alleged the company operated as an unregistered exchange even though it told investors in going public that regulators might deem some of the products traded on its platform to be securities.
“Coinbase has argued that its business model got tacit approval from the SEC, when the agency approved its initial public offering,” the Times added. “The company has said it is willing to work with the S.E.C. but does not agree with its position that all digital assets offered on its trading platform must be registered securities, which require more strict oversight.”
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