• The US Securities and Exchange Commission (SEC) sent a Wells Notice to Coinbase on March 22, 2021, indicating that it had made a “preliminary determination” to recommend an enforcement action against the company for violations of federal securities laws related to its Earn program.
• CEO Brian Armstrong stated that Coinbase’s S1 filing had 57 references to staking and that their legal process will provide an open and public forum before an unbiased body for them to prove their case.
• The SEC has also previously charged Gemini for its Earn program and unveiled charges against Justin Sun of Tron for TRX and BitTorrent (BTT) tokens being securities.
SEC Issues Wells Notice To Coinbase
The United States Securities and Exchanges Commission (SEC) has issued a Wells Notice to leading American crypto exchange Coinbase on March 22, 2021. This notice indicates that the commission is planning to take enforcement action against the exchange related to services provided by it including its Earn program.
Coinbase Could Face Enforcement Action
A Wells Notice informs companies or individuals that the commission is looking into potential securities violations which could lead to enforcement action. The filing states, „the Staff has advised the Company that it made a „preliminary determination“ to recommend that the SEC file an enforcement action against the Company alleging violations of the federal securities laws, including the Securities Exchange Act of 1934.“
Coinbase CEO’s Response
Brian Armstrong – CEO of Coinbase – stated in response that they were aware of all listing processes before going public as well as making 57 references regarding staking in their S1 filing. He emphasized how legal proceedings will provide an open platform where they can present facts about how SEC hasn’t been fair or reasonable when engaging with digital assets.
Other Exchanges Investigated By The SEC
Gemini was previously investigated by SEC for its Earn Program while Justin Sun from Tron was recently charged after TRX and BitTorrent (BTT) tokens were declared as securities by the commission. Moreover, 8 celebrities were also charged with promoting unregistered securities.
Conclusion
It remains unclear what exactly led up to this decision by SEC however one thing is certain – cryptocurrency exchanges must be wary about offering services which may fall under security regulations even if unintentional as seen in this case with Coinbase.