'We're confident the courts will prove Chair Gensler wrong in due time,' she said. Kristin Smith, CEO of the Blockchain Association trade group, rejected Gensler's efforts to oversee the industry. Gensler's crypto crackdown has prompted the industry to boost compliance, shelve products and expand outside the country. New Jersey fined Coinbase $5 million for selling unregistered securities.Ĭoinbase said it expects to have 'productive conversations' with the states and is confident its staking services are not securities. States probing the staking rewards program also include Alabama, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington and Wisconsin. 'You simply can't ignore the rules because you don't like them,' SEC Enforcement Chief Gurbir Grewal, who is not related to Paul Grewal, said in a statement. The SEC had warned Coinbase in March that charges might be coming. The SEC lawsuit seeks civil fines, the recouping of ill-gotten gains and injunctive relief. In the staking rewards program, which has about 3.5 million customers, Coinbase pools crypto assets and uses them to support activity on the blockchain network, in exchange for 'rewards' it provides customers after taking a commission for itself. Transactions generated 75% of its $3.15 billion of net revenue last year. The SEC said Coinbase traded at least 13 crypto assets that are securities that should have been registered, including tokens such as Solana, Cardano and Polygon.įounded in 2012, Coinbase recently served more than 108 million customers, and ended March with $130 billion of customer crypto assets and funds on its balance sheet. In its complaint filed in Manhattan federal court, the SEC said Coinbase has since at least 2019 made billions of dollars by operating as a middleman on crypto transactions, while evading disclosure requirements meant to protect investors.

Shares of Coinbase's parent Coinbase Global Inc closed down $7.10, or 12.1%, at $51.61 after earlier falling as much as 20.9%. states led by California also on Tuesday accused Coinbase of securities law violations concerning its staking rewards program.

Paul Grewal, Coinbase's general counsel, in a statement said the company will continue operating as usual and has 'demonstrated commitment to compliance.' securities laws and we're asking them to come into compliance,' Gensler told CNBC.Ĭrypto companies say the SEC rules are unclear, and that the agency is overreaching by trying to regulate them.Ĭoinbase suffered about $1.28 billion of net customer outflows following the lawsuit, according to initial estimates from data firm Nansen. 'The whole business model is built on a noncompliance with the U.S. The lawsuit is the SEC's second in two days against a major crypto exchange, following its case against Binance, the world's largest cryptocurrency exchange, and founder Changpeng Zhao.īoth civil cases are part of SEC Chair Gary Gensler's push to assert jurisdiction over the crypto industry, which he on Tuesday again labeled a 'Wild West' that has undermined investor trust in the U.S.

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