Shares in cryptocurrency exchange Coinbase (NASDAQ:COIN) fell sharply in early Tuesday trading after the company was sued by the Securities and Exchange Commission (SEC) for an alleged breach of U.S. securities rules.
The SEC sued Coinbase in federal court today.
“The Coinbase Platform merges three functions that are typically separated in traditional securities markets—those of brokers, exchanges, and clearing agencies. Yet, Coinbase has never registered with the SEC as a broker, national securities exchange, or clearing agency, thus evading the disclosure regime that Congress has established for our securities markets,” it is said in the lawsuit.
The lawsuit also adds that Coinbase has acted as “an unregistered broker” since at least 2019.
The exchange is accused of making billions of dollars “unlawfully facilitating the buying and selling of crypto asset securities.”
“We allege that Coinbase, despite being subject to the securities laws, commingled and unlawfully offered exchange, broker-dealer, and clearinghouse functions,” said SEC Chair Gary Gensler in a press release.
“In other parts of our securities markets, these functions are separate.”
Coinbase shares fell 14.5% in pre-market Tuesday. The stock was down 9% yesterday after SEC sued Binance.
Mizuho analysts said today that the Binance lawsuit includes language that could place a third of rival Coinbase's sales at risk.