SEC lawsuit triggers selloff in Coinbase stock, COIN down 15%

Coinbase shares fell 22% after news broke that the U.S. Securities and Exchange Commission filed a lawsuit against the platform for allegedly violating securities laws.

The U.S. exchange stock fell to around $48 from $58.71 pre-market, according to Nasdaq data. At press time it had recovered slightly to $50.03, down 15% on the day.

Meanwhile, the lawsuit also triggered a mild decline in Bitcoin's (BTC) value, which fell by 0.51% on the 1-hour candle to $25,493 as of 13:30 UTC, according to CryptoSlate's data. The shares of several Bitcoin miners like Riot Blockchain, CleanSparks, Bitfarms, and Marathon Digital saw steep losses following the news.

According to the SEC, Coinbase operated as an unregistered broker, exchange, and clearing agency, offering unregistered securities via its Staking Program. The regulator also alleged that the exchange provided American investors with unregistered security tokens like ADA, SOL, etc., via its platform.

SEC said:

"The Coinbase Platform merges three functions that are typically separated in traditional securities markets—those of brokers, exchanges, and clearing agencies. Yet, Coinbase has never registered with the SEC as a broker, national securities exchange, or clearing agency, thus evading the disclosure regime that Congress has established for our securities markets."

Meanwhile, the lawsuit is coming less than a day after the watchdog filed similar charges against the largest crypto exchange by trading volume, Binance. The SEC stated that Binance profited in the billions by soliciting U.S. investors to trade using its unregistered platform.

Before now, the SEC and Coinbase have been involved in a long-drawn legal tussle over the lack of regulatory clarity within the crypto space. In a May 15 court filing, the financial regulator stated it was not obligated to provide the requested clarity.

In a June 6 prepared testimony before the House Committee on Agriculture, Coinbase chief legal officer Paul Grewal said:

"Regulation establishes clear rules for the industry, it also provides important accountability measures for potential bad actors. US legislation helps good guys innovate and ensures bad guys are held accountable."

On May 30, the exchange's CEO, Brian Armstrong, said the U.S. crypto industry faced a strong challenge from China.

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