SEC threatens to sue Coinbase over staking, more
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Coinbase, the largest cryptocurrency exchange in the U.S., is in the crosshairs of a top financial regulator, again.
Driving the news: The company said Wednesday evening that it received a Wells notice from the Securities and Exchange Commission (SEC) — a formal communique alerting a recipient of possible enforcement action.
- "We are prepared for this disappointing outcome and confident in the legality of our assets and services," Paul Grewal, chief legal officer, said in a statement.
Details: Coinbase said the Wells notice touched on aspects of its exchange, its staking service called Earn, and its non-custodial wallet following an SEC investigation it described as "cursory."
What they're saying: The SEC has said its identified potential violations without being specific about them, according to Coinbase.
- "We met with the SEC more than 30 times over nine months, but we were doing all of the talking," the company said in a blog post.
The big picture: SEC Chair Gary Gensler has said most everything in crypto is a security. And by the looks of the charges the SEC has levied against companies in the industry just this year alone, it appears the regulator is winding up for more.
- Recall Kraken settled with the SEC over staking earlier this year and shuttered that product in the U.S.
- Meanwhile, the SEC has charged and/or settled with companies and individuals including BKCoin, FTX's Nishad Singh, NBA Hall of Famer Paul Pierce, Terra's Do Kwon, Kraken, Nexo, Genesis, and Gemini — all in just the last three months. And now Tron's Justin Sun.
Flashback: This is not Coinbase's first brush with the SEC, nor its first Wells notice.
- The SEC threatened to sue the exchange in 2021 over its yet-to-be-launched Lend product, prompting Coinbase to drop it altogether.
- Also, there is the pending issue of the nine tokens that the SEC deemed were securities, some of which Coinbase still lists.
What we're watching: How Coinbase responds, which it has 30 days to do.
Quick take: Coinbase probably won't shutter its products and go quietly this time.
