As a reminder, the SEC has previously “cracked down” on cryptocurrency exchange Kraken in a similar way. In particular, in February the regulator’s representatives reached a general agreement under which Kraken shut down the stack for US customers and also paid a $30 million fine. That allowed the exchange not to pursue litigation and to neither admit nor deny its own guilt.

Also this week, similar claims in the form of a lawsuit were made against Justin Sun, founder of the blockchain project Tron. According to the Commission, TRX and BTT tokens are allegedly unregistered securities, so the project creator will have to answer for his actions.

However, the fact that the tokens are securities needs to be proven in court. Hopefully, Justin will get to it and put the Securities Commission in its place. Until that happens, the regulator has decided to launch a case against Coinbase as well.

New problems for cryptocurrency exchange Coinbase

In an interview with news outlet Decrypt, an anonymous insider stated that “Coinbase can defend itself in court and the company’s management is confident about its prospects.” That said, there is confusion among the platform’s management: they trivialize why the Commission has relatively freely allowed Americans to use steaking, and now they have suddenly changed their mind.

According to the same person, Coinbase has been in talks with the US Securities and Exchange Commission over digital asset regulation and policy for months. Meetings with the regulator began shortly after the company filed a petition with the regulator in July, asking for a public process to begin developing a set of rules for asset control. In doing so, Coinbase representatives wanted to clarify which digital assets were considered securities.

The company sent a letter to the Commission on Monday calling for clarity on the rules regarding staking. Coinbase’s general counsel Paul Grewal wrote that the company was surprised by the sanctions against its rival Kraken. Here’s a relevant rejoinder from the expert.

Prior to the Kraken deal, the Commission had not disclosed that it could treat steaking as a securities offering requiring registration with the regulator. In addition, the Commission has not previously voiced this position, despite the opportunity to engage the crypto industry in a discussion about it.

The next day, Coinbase received a formal warning of a possible lawsuit against the company by the Commission. Grewal noted that the Wells notice didn’t give the exchange enough information regarding the status quo: instead of “clear laws for Americans, the company received legal threats.”

Coinbase chief executive Brian Armstrong left a comment on Twitter regarding the situation.

Two years ago the Securities and Exchange Commission reviewed our business in detail and approved Coinbase’s listing. In Form S1 we clearly explained our asset listing process and included 57 references to staking. Coinbase has a rigorous asset vetting process and has rejected more than 90 projects that have applied for listing.

That is to say, Commission officials were aware of the stacking features of the exchange’s platform at the time of Coinbase’s IPO. They also approved the entire process, which means no one recognised the staking as an offering of unregistered securities at the time. Now the regulator’s position has turned 180 degrees without any intelligible explanation.

When US government agencies blocked cryptomixer Tornado Cash, Armstrong stated that if threatened by regulators, he would rather shut down steaking at Coinbase than censor transactions. Nevertheless, the exchange’s management is now ready to fight for its rights in court: the Commission may not be able to conclude a deal before the court. And if the regulator loses the trial, such an incident would be a powerful boost to the development and independence of the entire crypto industry.

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The Commission’s action has also been the subject of lively debate within the crypto community. Here’s what Caitlin Long, head of Custodia Bank, wrote on Twitter about it.

It should be abundantly clear by now that the Biden administration wants all areas of the crypto market – even legitimate ones – out of the US. Note yesterday’s White House economic report, which censures all financial innovation while supporting the “stability” of traditional banks.

Here’s another comment from Chris Dixon, principal partner at the Andreessen Horowitz fund.

The US has a long history of encouraging innovation, and regulators play a key role here as they set clear rules and prosecute fraudsters. We hope that the US will take a more constructive approach to engaging with innovators while protecting consumers.

There have also been those who have started to criticise Coinbase. Here’s a comment from a user nicknamed CryptoBull.

I have no sympathy for Coinbase. They had a chance to side with Ripple, but they chose to delist XRP thinking they would get favourable treatment.

And here’s a quote from The Block co-founder Mike Dudas. He’s clearly not thrilled with what’s happening and at the same time highlighted the uncertainty on the part of the Commission.

SEC (April 2021): “Go ahead and issue shares to the citizens of America, Coinbase. We approve the direction and disclosure of $COIN”.

US Securities and Exchange Commission (March 2023): “We are suing you for exactly the same lines of business and disclosures we approved prior to your stock listing.”


Hopefully Coinbase will decide to defend its own right in court. It is now becoming apparent that the US Securities and Exchange Commission has no plans to stop in its fight against the digital asset industry. Therefore, the main US crypto exchange not only has the opportunity to protect its own users, but also to defend the ideals of decentralization by proving the regulator's wrongdoing in court.

It should be reminded that the Commission still has not provided clear rules to regulate the cryptocurrency niche, so its current actions are similar to the terror of industry representatives. And it needs to be done away with.


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