![]() The broker services (including Coinbase Prime, which the company once touted as a “full-service prime brokerage platform,” per the SEC) would have to split off into their own corporate entities, apart from Coinbase’s clearing services (its branded virtual wallets for customers, plus its accounting for customer transactions in the company books), and apart from the company’s famed exchange programs, where global users can come together to track and trade their coins. District Court for the Southern District of New York, which is also litigating the upcoming trial of Sam Bankman-Fried), Coinbase’s entire business model would likely lie in shambles. The SEC’s five new charges against Coinbase mainly concern the fact that, like Binance, its corporate structure “merges three functions that are typically separated in traditional securities markets-those of brokers, exchanges, and clearing agencies.” Should the SEC prevail in court (its filing requests a jury trial in the U.S. (Coinbase is in favor of the legislation, which would impose a regulatory framework on certain digital coins that would be more akin to that which governs commodity crops-hence the Ag Committee setting.) Also on Tuesday, Coinbase chief legal officer Paul Singh Grewal testified in front of the House Agriculture Committee on “the future of digital assets” as well as a pending Republican-backed bill that, if passed, would allow certain digital currencies to be defined as commodities instead of securities, thus exempting them from SEC oversight. That would be another huge blow, not least because, per Coinbase’s own research, five of those states make for crypto’s (and Coinbase’s) biggest consumer markets. Basically, if Coinbase can’t prove to these agencies that digital currencies are not in fact investment contracts-and, thus, constitute a form of financial security just like a stock or bond-and it wishes to keep pursuing business as usual, it will have to exit those markets. Also on Tuesday, 10 state-level securities regulators filed a joint order against Coinbase and Coinbase Global, giving the exchange “28 days to show cause why they should not be directed to cease and desist from selling unregistered securities” in the relevant states (Alabama, California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington, and Wisconsin). Not that it’s just the SEC, which Coinbase executives perceive as a nemesis. Now, the feds have followed through with five charges: against Coinbase itself, for acting as a securities exchange, as a broker, as a clearing agency, and as an interstate securities trader without federal registration, and against Coinbase’s parent company, Coinbase Global, for overseeing the firm’s alleged lawbreaking. More recently, the SEC sent Coinbase a Wells notice in March, announcing its intent to sue the firm for flouting long-standing securities regulations. In January, New York state’s financial regulators slapped a $100 million fine on the exchange for neglecting anti-money-laundering laws. Last year, a disgruntled user filed a class-action suit against the company over its customer-account protection standards, and a couple of former Coinbase employees were also booked for insider trading. As was the case with Binance-the world’s largest crypto exchange by trading volume-the legal issues facing Coinbase had been a long time coming. ![]() After the Securities and Exchange Commission filed its devastating 13-charge lawsuit against Binance and its CEO on Monday, it kicked off Tuesday morning with a suit against Coinbase, the biggest crypto exchange in the United States, accusing it of participating in the securities market without proper registration. Another day, another crackdown from the federal government on the cryptocurrency industry.
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