A day after Binance was sued, the US Securities and Exchange Commission (SEC) has targeted Coinbase in its latest offensive against the crypto industry.
In a new press release, the SEC says it is charging Coinbase for “operating as an unregistered stock exchange, broker and clearing house.”
The regulator is also charging Coinbase for “failing to register the offering and sale of its crypto-asset staking-as-a-service program.”
In its 101-page complaint, the SEC says the crypto-assets offered on the Coinbase Platform, Coinbase Prime, and Coinbase Wallet services are all “crypto-asset securities” and thus fall entirely within the scope of securities laws .
While Coinbase and other firms have repeatedly asked for some semblance of regulatory clarity from US officials, the SEC says Coinbase has understood since at least 2016 that the Supreme Court’s decision in SEV v. W. J. Howey Co. as early as 1946 to determine whether a crypto asset is part of an investment contract and is subject to securities laws.
The “Howey Test,” which stems from the now 77-year-old lawsuit, has a four-point criterion that, according to the SEC, clearly helps companies determine whether a transaction qualifies as an investment contract.
The SEC claims that Coinbase ignored the Howey test in favor of maximizing profits.
“And as part of its public marketing campaign to position itself as a ‘compliant’ cryptocurrency actor
asset space, Coinbase has for years touted its efforts to analyze crypto assets according to established standards
back in Howey before making them available for trade.
But while paying lip service to their desire to comply with applicable laws, Coinbase has for years made available crypto assets that are investment contracts under the Howey test and established principles of the federal securities laws. As such, Coinbase has its interest in raising its profits over the interests of investors, and above compliance with the law and the regulatory framework that governs securities markets and was created to protect investors and the US capital markets.
As part of the relief sought for Coinbase’s alleged violations, the SEC is seeking civil fines, as well as a waiver of the exchange’s “ill-gotten gains” with interest levied.
At the time of writing, the two largest crypto exchanges in the world by volume, Binance and Coinbase, are now in the midst of fighting SEC charges.
Coinbase shares (COIN) fell 21% on the news.
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