The U.S. Securities and Exchange Commission has turned its sights on Coinbase amid a lengthy legal battle with Ripple. According to a recent report, the exchange received a Wells notice from the SEC, suggesting that a lawsuit would be filed for violation of securities laws.
Meanwhile, Stuart Aldorety, chief advisor of Ripple, tweeted SEC’s opinion Wells notice to Coinbase.
SEC Brooding Lawsuits On Coinbase After Wells News?
On March 22nd, Coinbase confirmed receipt of the Wells Notice from the SEC, stating that crypto exchanges are in violation of securities laws. The Wells Notice is a letter stating the commission’s suspicions of Coinbase’s violations. Normally, the notice should allow the recipient to respond to the claim convincing the supervisor.
Related reading: Bitcoin Transactions Rise, But Exchange Activity Remains Flat: Glassnode
However, a post a blog by the lead legal officer of Coinbase, Paul Grewal, told that Wells News presented rare information for the exchange to respond. The letter states that some unspecified tradable assets in Coinbase’s staking service, Coinbase Prime, and its own custody wallet are against investor protection laws.
According to the SEC, the news is a sequel to a previous investigation last year. That’s when the regulator admit that nine assets listed on Coinbase are unregistered securities in a lawsuit against a former employee of the crypto exchange.
However, Grewal noted that Coinbase keeps its asset listing process confidential and insists that it does not list securities. In addition, crypto exchanges have been frequent emphasized that its staking platform does not offer an unregistered security offering.
Amidst the failure, Stuart Alderoty’s reaction showed that Ripple could support crypto exchanges. In her tweet, the lawyer quoted an old saying: “The enemy of my enemy is my friend.” However, Ripple remains focused on its ongoing lawsuit with the SEC regarding XRP’s status as a security offering.
Ready to Fight the SEC In Court
In response to the recent SEC move, Coinbase highlighted that the regulator is threatening enforcement action after approving the business in 2021 based on the disclosure. It was a few days after the current SEC chief Gary Gensler took the position of chairman.
Coinbase also said it met with SEC officials 30 times in the past nine months as it tried to register parts of its business and settle its investigation. But regulators halted the process in January after Coinbase allegedly spent millions in legal fees to suggest a suitable registration model as it currently does not exist for crypto.
According to Grewal, the SEC is frustrating crypto companies trying to register like Coinbase. Crypto exchanges appear to be gearing up for a battle with the SEC following recent developments. Exchange cryptocurrency as well adjust risk disclosure.
The disclosure of the risk suggests that it may insist on not delisting a registered digital asset even if the regulator deems it a security unless a court orders otherwise. Exchange CEO tweet thread yesterday is also in line with this assumption.
before, the SEC made the same switch to crypto exchange Kraken, leading the company to agree to the permanent suspension of staking services for US customers. Kraken also had to pay a $30 million fine to stop the SEC from pressing further charges.
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