Crypto exchange Coinbase said it has received a Wells notice from the United States 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 wagering program, Coinbase Earn; listed digital assets; his wallet; or Coinbase Prime services. A warning letter from Wells typically warns a company that the SEC may follow with an enforcement action, but Coinbase did not provide any details other than “possible violations of securities laws.”[ads1];
“We specifically asked the SEC to identify which assets on our platforms they believe may be securities, and they refused to do so,” Coinbase General Counsel Paul Grewal said. “Today’s Wells notice also comes after Coinbase made multiple filing proposals to the SEC over the course of months, all of which the SEC ultimately refused to respond to.”
1/ Today Coinbase received a Wells Notice from the SEC focusing on stakes and asset listings. A Wells notice usually precedes an enforcement action.
— Brian Armstrong (@brian_armstrong) March 22, 2023
The crypto exchange said its products and services would “continue to operate as normal” amid the investigation. Grewal pushed back against the approach often cited by SEC Chairman Gary Gensler — i.e., “come in and talk to us” — and claimed that Coinbase met with SEC officials “more than 30 times over nine months” but largely received no feedback on their proposals. .
“At no point in this investigation has the SEC told us of a single specific concern about a single asset on our platform. To move to a Wells alert now is unusual to say the least.”
Related: Coinbase Venture ‘Fundamentally Different’ Than Kraken’s — Chief Counsel
Coinbase filed a petition with the SEC on March 20 in an attempt to explain to the regulator that stake is not necessarily considered a security universally. The exchange argued that none of its listed assets were considered securities under the regulator’s purview, and any potential targeting of the wallet 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 betting program for US users. The News of the Wells alert also followed the SEC announcing a lawsuit against Justin Sun and several celebrities over the offering, selling and spying of Tron (TRX) and BitTorrent (BTT).
Related: Turning On… SEC Takes Reactionary Action Against Crypto Lending