The price of the tokens included in the SEC lawsuit filed against Coinbase (COIN) by the U.S. Securities and Exchange Commission is plummeting.
One day after filing a similar lawsuit against Binance, the SEC accused Coinbase of breaking federal securities laws.
Shares of the exchange fell 20% in pre-market trading.
Solana (SOL), Cardano (ADA), Polygon (MATIC), Filecoin (FIL), Sandbox (SAND),
Axie Infinity (AXS), Chiliz (CHZ), Internet Computer (ICP), Voyager Token (VGX), NEAR protocol (NEAR), NEXO, FLOW, and DASH are the tokens cited in the lawsuit.
On Tuesday, the Securities and Exchange Commission filed a lawsuit against Coinbase, the biggest cryptocurrency exchange in the country, alleging that the firm had violated securities regulations by failing to register as a broker.
The lawsuit was filed a day after Binance, the largest cryptocurrency trading exchange in the world, was accused of mishandling customer cash
and misleading investors and regulators in the United States about its business practices.
Additionally, the SEC stated that the defendants, Coinbase, Inc. and Coinbase Global, Inc., should be “permanently restrained and enjoined” and be prohibited from conducting business in the United States.
“The SEC‘s reliance on an enforcement-only approach in the absence of clear rules for the digital asset industry is hurting America’s economic competitiveness and companies like Coinbase that have a demonstrated commitment to compliance,”
Coinbase‘s chief legal officer Paul Grewal shared with Decrypt.
“The solution is legislation that allows fair rules for the road to be developed transparently and applied equally, not litigation. In the meantime, we’ll continue to operate our business as usual.”
Companies that deal in cryptocurrencies have long fought having their goods categorized as traditional securities or commodities, claiming that they represent a brand-new class of digital asset that has its own set of laws and norms.
The SEC disagrees and has frequently asserted that the majority of cryptocurrency offerings are securities that should be subject to the same regulations as Wall Street stocks and bonds.
The legal actions taken against two of the greatest names in cryptocurrency may push Congress to act on the regulation issue by igniting legal action and, ultimately, court scrutiny.
In response to the Coinbase case, Binance CEO Changpeng Zhao poked fun at the SEC.
One factor the SEC considers when deciding whether a business is acting as a broker or an exchange is solicitation.
The Howey test, which is used to assess whether an asset is an investment contract and thus a security, is another test that the SEC uses. If an asset involves three elements—investment in a shared venture, a fair expectation of profits, and the use of others’ labor—it is regarded as a security.
20% drop in Coinbase stock following SEC complaint
At market open on June 6, the stock of cryptocurrency exchange Coinbase fell more than 20%. Shares had hit an intraday low of $46.43 at the time of writing, but they have since pared some of their losses and are currently trading at $50.14. The corporation currently has a $13.7 billion market capitalization.
On the same day, Coinbase was sued by the US Securities and Exchange Commission for operating an unlicensed national securities exchange, broker, and clearing agency and failing to register the offer and sale of its staking-as-a-service program for digital assets. Gary Gensler, chair of the SEC, stated:
“Coinbase’s alleged failures deprive investors of critical protections, including rulebooks that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspection by the SEC.”
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