Shares of Coinbase are down 20% after the Securities and Exchange Commission sued the crypto company for allegedly violating securities law.
At the time of writing, shares had dropped to an intraday low of $46.43. However, they have recovered slightly and are currently trading at $50.14. As a result, the corporation’s market capitalization now stands at $13.7 billion.
On the same day, the US Securities and Exchange Commission filed a lawsuit against Coinbase, accusing them of operating an unlicensed national securities exchange, broker, and clearing agency.
Additionally, authorities accuse the exchange of failing to register the offer and sale of its staking-as-a-service program for digital assets. Gary Gensler, chair of the SEC, stated:
“Coinbase’s alleged failures deprive investors of critical protections, including rulebooks that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspection by the SEC.”
A task group consisting of 10 states securities authorities from Alabama, California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington, and Wisconsin filed a show-cause order against Coinbase. The charge alleged 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.”
Therefore, after the ruling, Coinbase must respond and present justifications within a 28-day period. The exchange must state the reason why they should not be compelled to cease offering unregistered securities in Alabama.
Coinbase stock debuted on the American Nasdaq exchange on April 14, 2021. Since reaching an all-time high of $435 on the day of listing, shares have dropped 88%.
As part of its listing requirement, the exchange needs to submit a Form S-1 to the SEC. This is to register with the watchdog and obtain regulatory approval.
