The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Coinbase, America’s biggest crypto exchange, for alleged securities violations. The SEC accused Coinbase of operating an unregistered securities exchange, broker, and clearing agency. It also accused the company of failing to register its crypto staking program as a securities offering.

The SEC’s lawsuit came just a day after it filed a similar suit against Binance, the world’s biggest crypto exchange, and its chief executive Changpeng Zhao. The SEC filed 13 charges against Binance corporate entities and Zhao and has asked for an emergency order to freeze all assets held on Binance US, the company’s separate exchange for American customers. The order doesn’t apply to assets held by international customers on the main Binance exchange.

• According to the SEC, Coinbase facilitated trading for 13 cryptocurrencies the agency considers securities. U.S. law has not formally specified whether cryptocurrencies should be regulated as securities. But the SEC asserts that dozens of cryptocurrencies meet the legal definition of securities and has filed several lawsuits based on its rationale.

• The SEC also alleged that Coinbase’s staking program, which lets users earn more tokens for supporting the operations of an underlying blockchain, meets the legal definition of a securities offering and should have been registered as such. “You simply can’t ignore the rules because you don’t like them or because you’d prefer different ones,” said Gurbir Grewal, Director of the SEC’s Division of Enforcement.

Coinbase, founded in 2012, is America’s biggest crypto exchange. It held a public market listing during the crypto frenzy of 2021 and was valued as high as $100bn on its first day of trading. Afterward, its market value tumbled alongside the general stock and crypto markets. The SEC’s lawsuit led to a further 15% drop, with Coinbase now valued at $12bn.

Coinbase reported a $3.6bn net income on $7.4bn in revenue in 2021. In 2022, it reported a $2.7bn net loss on $3.1bn in revenue. The SEC claims Coinbase earned billions from acting as a securities exchange, broker, and clearing agency without registering as one. It has filed a civil case in a New York court seeking fines and disgorgement. Coinbase retains the right to defend itself against the SEC’s allegations in court.

• The lawsuit isn’t surprising, given that Coinbase disclosed a warning from the SEC of potential enforcement action this March. Coinbase said it’ll fight the lawsuit and “continue to operate our business as usual.”

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