https://www.theblock.co/post/222084/sec-investigating-coinbase-for-its-earn-product-wallet-service-and-exchange-activity
Exchange giant Coinbase was issued a Wells Notice by the Securities and Exchange Commission, notifying the company of investigations into several offerings and continuing a string of regulatory warning shots fired at crypto firms in the U.S.
The notice relates to aspects of the company’s exchange, its staking service, Coinbase Earn and Coinbase Wallet, the company wrote in a blog post.
"Today, the SEC gave Coinbase a 'Wells Notice' regarding aspects of the company’s exchange, our staking service Coinbase Earn, and Coinbase Wallet after a cursory investigation," Coinbase said.
"Today’s Wells Notice does not provide a lot of information for us to respond to," the company said. "The SEC staff told us they have identified potential violations of securities law, but little more."
Coinbase added that it will operate products and services as usual.
A Wells Notice is a document the regulator issues to entities that are under investigation — it does not necessarily imply a conclusion or foregone action.
“We are prepared for this disappointing outcome and confident in the legality of our assets and services," Coinbase's Chief Legal Officer Paul Grewal said in a statement. "If needed, we welcome a legal process to provide the clarity we have been advocating for and to demonstrate that the SEC simply has not been fair or reasonable when it comes to its engagement on digital assets."
The blog post states that the company has met with the SEC more than 30 times in the past nine months alone, but it has been unresponsive. It added that it has rejected more than 90% of assets that apply to be listed on the platform.
The news comes as regulatory scrutiny ramps up with regards to staking, among other products. In February, rival exchange Kraken settled a case with the SEC over charges related to its staking-as-a-service program, leading it to shut down those operations in the U.S. and pay a $30 million fine. The regulator charged the company with selling unregistered securities because of the expectation of return from the staking-as-a-service program. Coinbase has publicly asserted that its own staking activity does not fall afoul of U.S. securities law.
"Staking is not a security under the U.S. Securities Act, nor under the Howey test, which the SEC uses to determine whether an investment contract is a security," Grewal wrote in a post soon after the SEC's settlement with Kraken.
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