The Securities and Exchange Commission has charged Coinbase with operating illegally in a bid to crack down on the crypto industry. Specifically, the SEC believes that Coinbase operated as a broker, exchange and clearing agency for investments without properly registering.

All of the aforementioned services are subject to SEC rules, but because Coinbase failed to register, the SEC said it managed to escape oversight, including checks against conflicts of interest. In essence, authorities in the US are trying to police the cryptocurrency industry in a more aggressive manner, basing their increased scrutiny on the fact that crypto assets operate just like other investments that are subject to oversight. This increased policing is also partially justified by the high-profile collapse of cryptocurrency exchange FTX, which took the entire industry by storm by filing for bankruptcy protection in November 2022.

Coinbase officials cited by bcc.com argued that there’s a need for clear legislation in the crypto space, which should be developed transparently and applied equally. They also emphasised that litigation is not a solution and revealed that Coinbase will be operating as usual for the time being. However, financial regulators from 10 states, including Alabama and California, also filed legal actions alleging that Coinbase was operating as an unregistered securities dealer.

Coinbase previously sued the SEC Coinbase filed its own lawsuit against the SEC in April 2023 over a lack of response to a petition from 2022. By filing this legal claim, Coinbase aimed to compel the SEC to provide a response to the original petition, which inquired whether the SEC would propose and adopt rules to govern the regulation of securities that are offered and traded via digitally native methods. Even though the SEC never responded to the petition, Coinbase’s chief legal officer Paul Grewal asserted that the SEC has already made up its mind to deny the original petition based on its enforcement activity in the crypto industry but has not issued a public statement in this regard.

The Securities and Exchange Commission also sued Binance just a day ago, alleging that the company’s founder, Changpeng Zhao, ignored the rules meant to protect investors to keep operating in the US. According to bbc.com, the SEC's complaint highlighted 13 charges, accusing the company and Mr Zhao of unlawfully soliciting investors and customers, misrepresenting the degree of trading on the platform, and misleading the public about its oversight. Another US financial regulator, namely the Commodity Futures Trading Commission, filed a lawsuit against Binance in March, accusing it of operating in the country illegally.

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