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US-based crypto exchange Coinbase is facing a lawsuit from the Securities and Exchange Commission (SEC) over securities violations related to staking, listing of its assets and the Coinbase wallet.
The lawsuit threat came in the form of a so-called Wells notice to the exchange on Wednesday, alleging that the trading platform may be violating US securities laws.
A Wales notice is often a notice sent by a regulator before legal action can commence. Wells notices have recently been sent to several US crypto companies. These included the New York-based financial firm Paxos to issue Binance USD (BUSD) Stablecoins, which have been deemed an “unregistered security” by the SEC.
SEC Knew About Coinbase Staking: CEO
In a comment posted on Twitter, Coinbase CEO Brian Armstrong said that the SEC has known about Coinbase’s staking service for a long time without objection. He added that a filing to regulators at the time Coinbase went public “included 57 references to staking,” and pointed out that the SEC had no problem with it at the time.
“While we understand that this is part of the journey to reform our financial system, we stand by the law, believe in the facts, and look forward to the opportunity for Coinbase (and by extension the wider crypto community) to come before the Court. Welcome.” Armstrong said.
He also hinted in a Twitter thread that aggressive actions by US regulators could lead Coinbase to seek greener pastures overseas:
Echoing Armstrong’s comments, Coinbase Chief Legal Officer Paul Grewal wrote in a blog Post All the exchanges to receive the Wells notice asked the SEC for “fair crypto regulations for Americans.”
“We are confident in the legality of our assets and services, and we welcome a legal process, if necessary, to provide the clarity we have been advocating for and to demonstrate that the SEC is pursuing its engagement. Hasn’t been fair or appropriate when talking about digital assets,” Grewal wrote, promising users that Coinbase services will continue to operate as usual.
