US SEC crypto crackdown: Will lawsuits against Coinbase push share price lower?

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US SEC Crypto lawsuits against Binance, Coinbase

Coinbase share price tumbled about 12% on Jun 6, 2023 after the US securities market regulator sued the company along with its cryptocurrency peer Binance. However, the stock has reported a quick rebound with its shares trading 2% higher in premarket trading on Jun 7, 2023. 

In this blog, we try to understand why the US SEC sued Coinbase and Binance and the long-term repercussions of the lawsuits. 

US SEC crackdown: Why did the US SEC sue Coinbase and Binance?

The SEC which is the top securities market regulator in the US over the past few months has been trying to increase its scrutiny on cryptocurrency assets and companies who enable trading in such assets. 

The role of the SEC is to ensure the investments made by the general public are safe and not misused by such trading firms for their own benefit while also ensuring companies meet stringent compliance requirements to function in the competitive securities market. 

The SEC believes that Binance - the world’s largest cryptocurrency is operating a “web of deception” while constantly manipulating its investors. The SEC alleged that Binance artificially inflated its trading volumes, diverted customer funds, failed to restrict U.S. customers from its platform and misled investors about its surveillance controls. 

When it comes to Coinbase, the SEC filed a case that claimed the company since at least 2019 made billions of dollars by operating as a middleman on crypto transactions, while evading disclosure requirements meant to protect investors.

According to the lawsuit, Coinbase traded at least 13 crypto assets that are securities that should have been registered but weren’t, including tokens such as Solana, Cardano and Polygon.

If the SEC wins the lawsuits, it will provide the regulator unwavering jurisdiction to regulate such cryptocurrencies and crypto exchanges who also have been fighting the case that crypto tokens are not stocks and securities and hence should not come under SEC laws. 

Coinbase share price: Historic Performance

Coinbase share price: Cathie Woods increases stake in Coinbase!

Renowned investor Cathie Wood's Ark Invest bought about 400,000 shares of Coinbase after the company’s shares fell 12% in the previous session, to its five month lows. Cathie Wood has been constantly buying Coinbase shares ever since the fallout of Sam Bankman Fried led FTX crypto exchange. 

This is not investment advice. Investments in the securities market are subject to market risk, read all the related documents carefully before investing. Past performance is not indicative of future returns.