SEC sues Coinbase for operating as unregistered broker; stock slumps (updated)
[Coinbase Global, Inc.(COIN)](/symbol/COIN?source=content_type%3Areact%7Csection%3Amain_content%7Csection_asset%3Ameta%7Cfirst_level_url%3Anews%7Csymbol%3ACOIN), (/symbol/BTC-USD?source=content_type%3Areact%7Csection%3Amain_content%7Csection_asset%3Ameta%7Cfirst_level_url%3Anews%7Csymbol%3ABTC-USD), (/symbol/ETH-USD?source=content_type%3Areact%7Csection%3Amain_content%7Csection_asset%3Ameta%7Cfirst_level_url%3Anews%7Csymbol%3AETH-USD) [MSFT](/symbol/MSFT?source=content_type%3Areact%7Csection%3Amain_content%7Csection_asset%3Ameta%7Cfirst_level_url%3Anews%7Csymbol%3AMSFT), (/symbol/MSTR?source=content_type%3Areact%7Csection%3Amain_content%7Csection_asset%3Ameta%7Cfirst_level_url%3Anews%7Csymbol%3AMSTR), (/symbol/RIOT?source=content_type%3Areact%7Csection%3Amain_content%7Csection_asset%3Ameta%7Cfirst_level_url%3Anews%7Csymbol%3ARIOT), (/symbol/HIVE?source=content_type%3Areact%7Csection%3Amain_content%7Csection_asset%3Ameta%7Cfirst_level_url%3Anews%7Csymbol%3AHIVE), (/symbol/MARA?source=content_type%3Areact%7Csection%3Amain_content%7Csection_asset%3Ameta%7Cfirst_level_url%3Anews%7Csymbol%3AMARA)By: [Liz Kiesche](/user/49447318?source=content_type%3Areact%7Csection%3Amain_content%7Csection_asset%3Ameta%7Cbutton%3Aauthor_name%7Cfirst_level_url%3Anews), SA News Editor [96 Comments](#comments)
Coinbase Global (NASDAQ:
COIN) stock tumbled 14% in Tuesday morning trading after the U.S.Securities and Exchange Commission filed a lawsuit against the cryptocurrency exchange, alleging that it’s operating as an unregistered securities broker.
Bitcoin (
BTC-USD), which initially slid after the news, has erased most of the decline and at about 11:36 AM is down 0.3% to almost $26K.As recently as April 17, the token had been trading at ~$30K.Ethereum ( ETH-USD), meanwhile, completely reversed its drop, adding 0.7%.
Since at least 2019, Coinbase (
COIN) has unlawfully facilitated the buying and selling of crypto asset securities, the SEC said, according to its complaint.The suit comes a day after the regulator sued Binance, the world’s largest crypto exchange, and its CEO for allegedly violating U.S.securities regulations.
“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 other parts of our securities markets, these functions are separate.”
Update at 11:28 AM ET: In addition, individual states are exerting pressure in the crypto space.
Alabama issued a “show cause order” that gives Coinbase (
COIN) 28 days to show why it shouldn’t be directed to stop selling unregistered securities in the state.The order is the result of a multi-state task force of 10 states securities regulators, the Alabama Securities Commission said in a staement Tuesday.
The states allege that Coinbase (
COIN) violated securities law by offering a staking rewards program without a registration to offer or sell securities.
Under staking, investors lock their crypto assets for a set period to help support the operations of a blockchain.In exchange, the investors are promised more crypto assets, the states said.Other states taking action against the crypto exchange are: California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington, and Wisconsin.
Crypto-related stocks also mostly recovered from their early swoon.MicroStrategy (
MSTR) +3.5% after announcing a new AI partnership with Microsoft; Riot Platforms ( RIOT) -0.8%; Marathon Digital ( MARA) +1.4%; Hive Blockchain ( HIVE) +0.3%.
The SEC has long contended that most digital tokens qualify as securities rather than currency.In 2018, though, an SEC official had said that neither bitcoin (
BTC-USD) nor ethereum ( ETH-USD) are securities..
