• The Alabama Securities Commission has issued a Show Cause Order against cryptocurrency exchange Coinbase, alleging they offered unregistered securities.
• The SEC has also filed a lawsuit against Coinbase for allegedly offering unregistered securities.
• Coinbase also faces allegations of not providing FDIC or SIPC protection to its 3.5 million staking rewards program accounts.
SEC Lawsuit Against Coinbase
The United States Securities and Exchange Commission (SEC) is suing the cryptocurrency exchange Coinbase for alleged unregistered securities offerings. According to the SEC, Coinbase never registered as a broker, national securities exchange or clearing agency, thereby evading the disclosure scheme for securities markets. In addition, Chair Gary Gensler stated that the crypto exchange allegedly deprived its customers of critical protections that prevent fraud and manipulation.
Show Cause Order by Multistate Task Force
A multistate task force composed of state regulators from Alabama, California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington and Wisconsin have issued a Show Cause Order against cryptocurrency exchange Coinbase. The order alleges that “Coinbase violates the securities law by offering its staking rewards program accounts to Alabama residents without a registration to offer or sell these securities” and gives them 28 days to show cause why they should not be directed to cease and desist from selling unregistered securities in Alabama.
No Insurance Protection for Staking Rewards Program Accounts
Regulators claim that there is “no protection from loss for any of these accounts” such as the more than 33 thousand held by Alabama investors since it is not insured by Federal Deposit Insurance Corporation (FDIC) or Securities Investor Protection Corporation (SIPC). Furthermore, regulators are advising investors to contact ASC in order to confirm registration status before investing money into staking rewards programs.
Previous Settlements with Other Crypto Exchanges
Kraken previously settled with the SEC regarding its U.S. crypto staking program for $30 million while other exchanges may face similar issues in the future if they do not comply with regulations set out by different states within America and abroad.
Conclusion
In conclusion, state security regulators have targeted Coinbase concurrently with an SEC lawsuit as it offers unregistered services which deprive customers from important protections needed to avoid fraud and manipulation while also providing no insurance on their staking rewards accounts