The regulator’s main claim against Coinbase is the exchange’s stacking software, which allows users to make money by locking up certain crypto-assets. The Commission had previously forced the closure of a similar platform for US citizens on cryptocurrency exchange Kraken, with the latter also receiving a $30 million fine.

The topic came up during yesterday’s hearing before the House Financial Services Committee, which was attended by SEC Chairman Gary Gensler. Specifically, Gensler was asked if his agency had reviewed various features of Coinbase before the cryptocurrency exchange went public. Gary answered in the affirmative, followed by a question about why the Commission didn’t pay attention to Coinbase’s steaming platform then, but now for some reason wants to deal with the exchange in court.

Also, some representatives have expressed frustration that the SEC is causing problems for local cryptocurrency exchanges like Coinbase instead of “taking care of Binance”. In addition, Gensler was reminded of his meetings with representatives of the FTX trading platform, whose collapse in November 2022 led to billions of dollars in losses for investors.

In the end, this “questioning” proved extremely unpleasant for Gary, in addition, during the meeting there was a proposal to strip Gensler of his position.

What Coinbase is being sued for

According to Cointelegraph’s sources, Wells’ notice was received by the exchange back on March 22, 2023. Now Coinbase chief executive Brian Armstrong has given an interview to CNBC in which he expressed frustration with the Securities Commission’s policy. Here is one of his quotes in which the expert shares his view of what is happening.

We have met with them over thirty times in the last year. We never got any feedback from them on what we could do better or differently, and then came this Wells notice. I think we will eventually have to go to court to get the clarity we need and set a precedent.

As a reminder, Coinbase has previously asked SEC officials for clarity on what digital assets the regulator considers to be unregistered securities and why. The Commission regularly files lawsuits over the alleged proliferation of such investment instruments, yet fails to allow companies and developers to rectify the situation. Ironically enough, Coinbase received this notice after such an appeal, which hints at a lawsuit coming.

Armstrong has stated that his company is ready for a long fight with the Commission if necessary. While a lawsuit is not the preferred outcome, Coinbase will have to defend its interests.

And it's a logical decision, as the cryptocurrency exchange is left with no way out. The thing is, if Coinbase doesn't try to defend itself, it will continue to face legal action and fines. As the crypto industry has repeatedly pointed out, the regulator is actively punishing the companies, but at the same time does not leave them the right to another outcome, which is quite strange.

Brian also criticised the lack of clarity for cryptocurrency companies from the Commission, accusing the regulator of “abdicating responsibility”.

Coinbase is also considering relocating its business to other countries. So far, the UK is the preferred location for the move, but those possibilities are still being discussed.

Naturally, this is a bad trend for the US. Due to serious regulatory pressure on cryptocurrency businesses, the latter will simply leave the country. As a result, the government will lose millions of dollars in taxes, along with the ability to influence innovation related to digital assets. And this is already causing concern in the US government.

In general, the SEC has had enough episodes with crypto platforms being forced to comply with the agency’s requirements. It’s impossible to grow startups and support big business in such an environment. The SEC’s strategy needs urgent review before it leads to negative consequences for both the local economy and the digital asset industry as a whole.


We believe that such a statement from a representative of the largest cryptocurrency exchange from the US should make officials wake up and realise how damaging the current SEC policy is. If the situation does not change, big businesses will move elsewhere, and the US will lose not only tax revenue but also its role as a financial leader in the long run. So what is happening needs to change now, not tomorrow.