According to a statement published by the Alabama Securities Commission on June 6, a multistate task force made up of state regulators from Alabama, California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington and Wisconsin has issued an order of show cause against cryptocurrency exchange Coinbase. The order alleges that “Coinbase violates securities law by offering its staking rewards program accounts to Alabama residents without a registration to offer or sell such securities.”
In particular, the order gives Coinbase 28 days to show cause why they should not be required to stop selling unregistered securities in Alabama. On the same day, Coinbase received a notice of demand from the US Securities and Exchange Commission alleging the offering of unregistered securities. According to regulators:
“Coinbase takes a cut [staking] profits before sharing them with investors. The ASC [Alabama Securities Commission] The action does not prohibit Coinbase from offering staking as a service, as long as it complies with Alabama law.”
In addition, the ASC said that the nearly 3.5 million accounts in Coinbase’s wagering rewards program nationwide “are not insured by the Federal Deposit Insurance Corporation (FDIC) or the Securities Investor Protection Corporation ( SIPC)”. As a result, regulators say there is “no loss protection for any of these accounts, including the more than 33,000 accounts currently held by Alabama investors.”
“Investors are advised to contact ASC to confirm the registration status of a staking rewards program before investing their money.”
Simultaneously, the SEC’s lawsuit against Coinbase alleged that the latter never registered as a broker, national stock exchange or clearing agency, thereby circumventing the securities markets disclosure scheme. Addressing Coinbase’s latest lawsuit, SEC Chairman Gary Gensler said the crypto exchange allegedly deprived its customers of critical protections that prevent fraud and manipulation. Another cryptocurrency exchange, Kraken, previously settled with the SEC for $30 million regarding its cryptocurrency staking program in the United States. Another SEC lawsuit against cryptocurrency exchange Binance is also ongoing.
Magazine: Crypto Regulation: Does SEC Chairman Gary Gensler Have the Last Word?
