Coinbase, a prominent cryptocurrency exchange, is now facing legal action from ten US states, escalating its regulatory challenges. Following charges brought by the US Securities and Exchange Commission (SEC), Coinbase has received a show cause notice from a coalition of states. Notably, the Alabama Securities Commission has taken the lead, granting the company a 28-day window to defend itself against the potential issuance of a cease-and-desist order.
The ten states involved in issuing the notice are Alabama, California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington, and Wisconsin. The exchange now faces the risk of a cease-and-desist order due to the alleged sale of unregistered securities.
This development comes after the SEC previously issued a Wells Notice to Coinbase in March, signaling its intention to pursue legal action for alleged violations of federal securities law. The charges were formally filed by the regulator, prompting state regulators to pay attention to the exchange.
Coinbase’s alleged violation of securities law involves its staking rewards program accounts, according to the notice released by the Alabama Securities Commission. The disclosure of the information and the involvement of the aforementioned states have garnered public attention, highlighting the extent of Coinbase’s legal predicament.
The situation mirrors recent actions taken against another major cryptocurrency exchange, Binance, which also faced charges of a similar nature. Both exchanges have experienced significant declines in their stock values, with Coinbase’s stocks plummeting by 17% since the SEC lawsuit was initiated.
Coinbase has further voiced concerns about the US government’s stance on cryptocurrencies, cautioning that it jeopardizes the country’s technological leadership. The exchange emphasizes the need for a pro-crypto policy to foster innovation and maintain its competitive edge in the rapidly evolving digital asset landscape.
Written by Agbo Obinnaya.
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