The US Securities and Exchange Commission (SEC) has initiated an investigation into whether Coinbase allowed customers to trade digital assets that should have been registered as securities, as reported by Bloomberg.
The SEC’s scrutiny has intensified as Coinbase has increased the number of tokens on its platform. This investigation is connected to a previous insider trading case involving a former Coinbase product manager, who faced charges last week. This individual was among three charged by the Department of Justice (DoJ) and the SEC.
While the DoJ’s charges did not reference securities, the SEC’s charges did. According to a statement from the agency, out of 25 crypto assets that the defendants allegedly bought using insider information, “at least nine” were classified as securities.
In response, Coinbase’s Chief Legal Officer Paul Grewal issued a strong rebuttal through a blog post titled, “Coinbase does not list securities. End of story.”
This inquiry represents the latest chapter in the ongoing conflict between regulators and cryptocurrency exchanges regarding the definition of securities. The SEC is currently engaged in a legal battle with Ripple to determine whether XRP qualifies as a security, and Coinbase had to abandon a proposed interest-earning product last year after the agency deemed it related to securities. At that time, Coinbase CEO Brian Armstrong criticized the SEC for what he described as “really sketchy behavior.”