SEC Subpoenas Coinbase Over Listing Process, Staking Products

Key Takeaways

Coinbase revealed in a Wednesday quarterly filing that it’s under investigation by the SEC over its listing process and staking, yield, and stablecoin products.
Coinbase has previously accused the SEC of a lack of clarity and regulation by enforcement after facing multiple public and legal skirmishes with the regulator.
Coinbase has said it doubts the investigation will have material adverse effects on the company.

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Coinbase has been involved in multiple private and public spats with the U.S. Securities and Exchange Commission over the past year. 

Coinbase Confirms SEC Investigation

The SEC subpoenaed Coinbase and requested information and documents related to its business operations and products, new filings show.

According to a quarterly report filed by Coinbase Wednesday, the largest U.S.-based crypto exchange is being probed by the U.S. regulator over its token listing process and specific customer programs. 

“The Company has received investigative subpoenas and requests from the SEC for documents and information about certain customer programs, operations, and existing and intended future products, including the Company’s processes for listing assets, the classification of certain listed assets, its staking programs, and its stablecoin and yield-generating products,” the company said in the Q-10 filing, which all public companies must submit to the securities regulator at the end of each fiscal quarter.

The disclosure comes after the SEC accused Coinbase of listing “at least nine” tokens that could be classified securities in an insider trading lawsuit against one of its former employees. Following the July 22 lawsuit, Coinbase published a blog post accusing the SEC of “regulation by enforcement” and a lack of clear standards for classifying securities. “Coinbase does not list securities. End of story,” the post’s headline read.

However, this spat isn’t Coinbase’s first with the regulator. In September 2021, Coinbase’s chief legal officer Paul Grewal said in a blog post that the SEC had threatened to sue the exchange over its planned Coinbase Lend program without clarifying why. “Last Wednesday, after months of effort by Coinbase to engage productively, the SEC gave us what’s called a Wells notice about our planned Coinbase Lend program,” Grewal wrote. A Wells notice is an official procedure a regulator follows to tell a company it intends to sue it. Grewal said the exchange was caught off-guard by the SEC’s “threat to sue without ever telling us why.”

According to yesterday’s quarterly report, the SEC is now not looking merely at Coinbase’s listing process and listed assets but also at its staking, stablecoin, and yield-generating products, likely under suspicion that they may also constitute unregistered securities. Commenting on the subpoenas in the filing, Coinbase said that the outcomes of the investigation remain uncertain and that the firm cannot estimate the probe’s potential impact on its operations. The firm believes that the ultimate resolution of the investigation won’t have a “material adverse effect” on the company’s operations or profitability while highlighting that the investigation may harm it in the short term.

Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.

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