Coinbase Shares Turn Lower Amid Legal Battle With SEC
Coinbase is one of the few cryptocurrency exchanges which are listed on the NASDAQ. During the Tuesday trading session, the Coinbase (COIN) stock turned lower after news that the exchange was sued by the SEC (Securities and Exchange Commission) for breaking the rules.
Earlier today, the SEC reached out to the federal court in order to use the Coinbase exchange. According to SEC, the Coinbase exchange acts as a clearing agency, exchange, and broker. However, Coinase never registered with the Securities and Exchange Commission as a broker, clearing agency, or national securities exchange.
This means Coinbase is evading the Congress' disclosure requirements set for the securities markets in the USA. On the surface, it appears that the SEC has a strong case against Coinbase as it never registered with the SEC for its specific roles.
Coinbase - An Unregistered Broker
According to the details of the lawsuit, Coinbase has been offering its services to US customers as an unregistered broker. In addition, the crypto exchange has been offering such services since 2019.
Another allegation is that Coinbase has made billions of dollars through the facilitation of buying/selling of cryptocurrencies. In the lawsuit, the SEC has classified these cryptocurrencies as crypto asset securities.
In other words, Coinbase offered brokerage and exchange services unlawfully despite falling under the securities laws.
In addition, it is a normal practise in the securities market to keep these functions separate. But in the case of Coinbase, all of these function has been combined.
During the pre-market session on Tuesday, Coinbase shares were down by 14.5%. Just a day earlier, the Coinbase stock was down by 9% after the SEC sued the Binance exchange.
Over all, it appears that the SEC is going hard after the crypto exchanges around the world. And it appears that these moves by the SEC are also causing ripples in the crypto market. That's why the Bitcoin (BTC) and other cryptocurrencies are down for the day.