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Coinbase Threat Shows SEC Means Business
Yahoo Finance | | Sep 5, 2021
(Bloomberg) -- U.S. Securities and Exchange Commission Chair Gary Gensler just put the cryptocurrency industry on notice of how far the regulator will to go to tame a market he’s labeled the wild west of finance.
In threatening to sue Coinbase Global Inc. if the exchange lets customers earn interest on their digital tokens, the SEC sent a warning to other firms already offering similar products or contemplating doing so. The move is the clearest sign yet that, under Gensler, the regulator will aggressively use its powers to thwart products it’s uncomfortable with -- even before they launch.
Privately, ex-SEC officials said they were shocked by the agency’s posture, which Coinbase disclosed Tuesday in a blog post. The former officials said the SEC typically waits for firms to start selling investments before announcing possible sanctions, indicating the agency has found a forceful way to shut down cutting-edge crypto offerings it fears are putting consumers at risk. Coinbase slid 3.2% to $258.20 in New York trading on news of the SEC’s pending enforcement action.
The SEC is being aggressive for the first time in a long time
“The SEC is being aggressive for the first time in a long time,” said James Cox, a professor at Duke University School of Law. “The SEC has been putting a lot of muscle into cryptocurrency. It’s a big, fast-growing market and a fertile area for abuses.”
See: Will Gary Gensler at SEC be Good for Crypto?
SEC officials declined to comment.
Coinbase’s tussle with the SEC became public when Paul Grewal, the company’s chief legal officer, said the SEC determined that Lend involved “a security, but wouldn’t say who or how they’d reached that conclusion.” Grewal added that the agency told Coinbase “that if we launch Lend they intend to sue,” prompting the company to shelve the product until at least October.
Coinbase Chief Executive Officer Brian Armstrong later tweeted that the SEC was engaging in “really sketchy behavior.”
The crypto exchange won support from at least one long-time SEC adversary: Billionaire entrepreneur Mark Cuban. In a series of tweets, he urged Coinbase to fight back to prevent the agency from winning a legal ruling that allows it to assert more authority over tokens and DeFi. Cuban famously prevailed against the SEC in 2013 after it accused him of insider trading.
See: Decentralized Finance—Risks, Regulation, and the Road Ahead
Mark Cuban. In a series of tweets, he urged Coinbase to fight back to prevent the agency from winning a legal ruling that allows it to assert more authority over tokens and DeFi
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