Following the recent Securities and Exchanges Commission (SEC) lawsuit, Coinbase, a well-known US-based crypto exchange, is now facing multiple Show Cause orders from various US states.
SEC Lawsuit and Charges
The Alabama Securities and Exchange Commission (ASC), together with ten other states including Kentucky, Illinois, California, South Carolina, Washington, Vermont, Maryland, Wisconsin, New Jersey, and Alabama, filed charges against Coinbase for allegedly violating securities laws.
In its press release on June 6, the SEC announced its lawsuit against Coinbase, accusing the exchange of operating as an unregistered securities exchange, broker, and clearing agency. The watchdog claimed that Coinbase offered several digital assets that were not properly registered under the Securities Exchange Act of 1934 and 1933.
The SEC has filed a complaint in the US District Court for the Southern District of New York, seeking injunctive relief, disgorgement of ill-gotten gains plus interest, penalties, and other equitable relief.
The SEC also acknowledged the assistance provided by a multi-state task force led by California, which consists of state securities regulators from ten states.
Show Cause Orders
The multiple Show Cause Orders issued to Coinbase by the state regulators grant the exchange a 28-day period to present arguments and evidence to prove that its offerings are not unregistered securities. If Coinbase fails to provide substantial facts to support its claim, it will be compelled to cease trading crypto in the states involved.
Alabama State Securities (ASC) officials emphasized that although they did not prohibit Coinbase and other firms from offering staking services in the state, compliance with state laws is mandatory.
“The State of Alabama remains committed to ensuring that all market participants are offered the same level of protection under the Alabama Securities Act.”
Amanda Senn, the Director of ASC, highlighted that the action taken by the agencies is a crucial step towards safeguarding the interests of crypto investors and ensuring that they are protected under US laws.
The allegations against Coinbase have been supported by the California Department of Financial Protection and Innovation (DFPI), which has provided relevant evidence indicating that Coinbase has been offering and selling unregistered securities since November 2019.
Furthermore, the cryptocurrency market has been facing increased scrutiny, as evident from the SEC’s lawsuit against Binance and its CEO for violating US securities laws.
Of particular concern is the long list of crypto assets offered on Coinbase that the SEC has labeled as “unregistered securities.”
The news of the SEC lawsuit has had a significant impact on Coinbase’s stock price. Following the announcement, the company’s shares (COIN) experienced a decline of over 12%. However, there has been a slight recovery, with the stock now trading at $53.09 per share.
