SEC Sues Coinbase, Cardano Mentioned as Security in Both Lawsuits against Top Exchanges

The SEC finally filed a lawsuit against Coinbase shortly after charging Binance, again labeling Cardano (ADA) a security.

The US Securities and Exchange Commission (SEC) has emphasized its resolve that Cardano (ADA), among other assets, is an unregistered security. The regulatory watchdog filed charges against Coinbase a few hours after it went after Binance. The agency labeled several assets in both lawsuits, including ADA securities.

In less than 24 hours, the SEC has filed lawsuits against the two largest exchanges in the world. In the charges against Coinbase, which surfaced today, the watchdog alleges that the exchange has operated as a broker without proper registration since 2019. Fox Business Journalist Eleanor Terrett noted the details in a recent tweet.

4 key complaints from the @coinbase lawsuit:

1. Coinbase has operated as an unregistered broker since at least 2019, evading the disclosure scheme for securities markets.

2. Coinbase has deprived investors of disclosures and protections that come from registration, exposing…

— Eleanor Terrett (@EleanorTerrett) June 6, 2023

The SEC claims Coinbase has operated without making the necessary disclosures traditional to security markets due to its decision not to get registered. The agency also alleges that this decision has affected investors, as Coinbase has not provided the disclosures and protection they need.

Furthermore, the watchdog claims Coinbase’s staking program is a security. Recall that Paul Grewal, the Chief Legal Officer of Coinbase, disclosed in February that the exchange will not stop its staking service despite the SEC’s crackdown on staking, as it went after Kraken.

SEC Calls Cardano (ADA) a Security

In addition to the above charges, the Commission charged Coinbase for facilitating trading for crypto assets it calls unregistered securities. These assets include FLOW, VGX, MATIC, and ADA. Most of these assets, including ADA, were labeled securities in the charges against Binance.

This repetition underscores the agency’s resolve that the crypto tokens in question are securities. Interestingly enough, the agency once again failed to mention Ether (ETH) despite its Chairperson Gary Gensler previously asserting that all crypto assets that use the PoS consensus mechanism may be securities.

Cardano Founder Reacts: Is CBDC the Endgame?

The Coinbase lawsuit came up a few hours after Charles Hoskinson, the founder of Cardano, responded to the Binance complaint. Hoskinson claimed the regulatory crackdown was an effort towards creating a CBDC and presenting it as a replacement for mainstream crypto assets. 

Hoskinson believes the government wishes to establish control over people’s finances with the CBDC, as the asset would be created in collaboration with a select group of influential banks.

Notably, shortly after these claims from Hoskinson surfaced, Gensler disclosed on CNBC today that the emergence of central bank digital currencies, such as the digital dollar, the digital euro, and the digital yen, eliminates the necessity of “more digital currency.”

?NEW: Chairman @GaryGensler to @CNBC this morning:

“We don’t need more digital currency. We already have digital currency, it’s called the US Dollar, it’s called the Euro, it’s called the Yen. They’re all digital right now.”

— Eleanor Terrett (@EleanorTerrett) June 6, 2023

“We don’t need more digital currency. We already have digital currency, it’s called the US Dollar, it’s called the Euro, it’s called the yen. They’re all digital right now,” Gensler remarked, as disclosed by Terrett today.

Coinbase Case Different from Binance Case

Meanwhile, amid the drama, prominent blockchain reporter Colin Wu recently identified notable differences between the charges against Coinbase and those leveled on Binance. 

The difference between the SEC’s accusation of Coinbase and the Binance:
1. No charges against Coinbase CEO Brian Armstrong and other executives; 2. Spend a lot of time accusing Coinbase’s Staking business;
3. No proposal to prohibit Coinbase from engaging in financial-related…

— Wu Blockchain (@WuBlockchain) June 6, 2023

Interestingly, the SEC’s complaint against Coinbase brings no charges against Coinbase’s CEO Brian Armstrong. This contrasts with Binance CEO Changpeng Zhao’s situation who was charged in the Binance case.

Secondly, Wu emphasized that the Coinbase lawsuit mainly was directed towards Coinbase’s staking service. In addition, the complaint did not propose to terminate Coinbase’s financial services. It is important to note that Coinbase is a publicly traded company in the US whose IPO was approved by the SEC in April 2021.

Notably, entities such as Coinbase and Binance are facing the start of their lawsuits at a time when Ripple might be seeing the end of its legal tussle with the SEC. It remains to be seen if the SEC will also come after the founders of the assets mentioned in the Coinbase and Binance lawsuits.