Today the Securities and Exchange Commission (SEC) has filed a lawsuit against the Coinbase cryptocurrency exchange, alleging that it failed to register as a securities broker dealer, exchange, and clearing agent. It also filed claims over Coinbase’s operation of its staking service.
The news comes a day after the regulator sued Binance. While there are commonalities between the two lawsuits, the Binance filing had similar claims to Coinbase and several additional ones. The Binance suit included allegations of conflict of interest in dealing with market makers owned by the Binance CEO, a fact that was not disclosed.
Although the Coinbase lawsuit amounts to more than a hundred pages, it primarily sticks to the four core claims.
“We allege that Coinbase, despite being subject to the securities laws, commingled and unlawfully offered exchange, broker-dealer, and clearinghouse functions,” said SEC Chair Gary Gensler. “In other parts of our securities markets, these functions are separate. 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.”
Initially, the Coinbase stock price dropped more than 15% but has recovered slightly.
Meanwhile, after the lawsuit was filed against Binance yesterday, within 24 hours, the exchange experienced net outflows of $779 million on the Ethereum blockchain. That included $1.65 billion in gross outflows, offset by some inflows.
Bitcoin’s price dropped more than a $1,000 after the Binance announcement but has recovered most of that ground today.