Crypto exchange Coinbase said it received a Wells notice from the U.S. Securities and Exchange Commission recommending the regulator take enforcement action.
In a March 22 blog post, Coinbase said the “legal threat” could potentially target the exchange’s staking program, Coinbase Earn; listed digital assets; his wallet ; or Coinbase Prime services. A notification letter from Wells typically warns a company that the SEC may follow enforcement action, but Coinbase provided no details other than “possible violations of securities laws.”
“We specifically asked the SEC to identify assets on our platforms that they believe may be securities, and they have refused to do so,” said Coinbase chief legal officer Paul Grewal. “Today’s Wells notice also comes after Coinbase provided several submissions to the SEC regarding registration over the months, to which the SEC ultimately declined to respond.”
1/ Today, Coinbase received a Wells notice from the SEC focused on staking and asset listings. A Wells notice generally precedes an enforcement action.
—Brian Armstrong (@brian_armstrong) March 22, 2023
The crypto exchange said its products and services would “continue to operate as usual” during the investigation. Grewal often rebuffed the approach quoted by SEC Chairman Gary Gensler — i.e. “come talk to us” — claiming that Coinbase met with SEC officials “over 30 times in nine months,” but largely received no comments on its proposals.
“At no time during this investigation has the SEC raised with us a single specific concern regarding a single asset on our platform. Switching to a Wells review now is unusual to say the least.
Coinbase has filed a petition with the SEC on March 20 in an attempt to explain to the regulator that staking is not necessarily universally considered a security. The exchange claimed that none of its listed assets were considered securities under the regulator’s jurisdiction, and any potential targeting of its portfolio was based on a “misunderstanding of crypto products, assets and services” by the SEC.
The SEC had previously announced a settlement with Kraken in which the cryptocurrency exchange agreed to stop its staking program for US users. News of Wells’ notice also followed the SEC announce a trial against Justin Sun and several celebrities for the offer, sale and vantage of Tron (TRX) and BitTorrent (BTT).