SEC Probing Coinbase for Allegedly Listing Securities: Report

The U.S. Securities and Exchange Commission (SEC) is reportedly probing crypto exchange Coinbase (COIN), a publicly traded company it oversees, on suspicion it allowed U.S. persons to trade unregistered securities.

Bloomberg reported Monday that the regulator was investigating some of the tokens listed on the exchange. The SEC alleged last week that seven cryptocurrencies listed on Coinbase were securities in an unrelated insider trading case brought against a former product manager at the exchange.

SEC Chair Gary Gensler has previously also said he believed that Coinbase should register as a national securities exchange, given some of the cryptocurrencies it has listed.

Coinbase, for its part, has criticized the SEC for not providing clear rules for defining how cryptocurrencies might be deemed securities. The exchange’s Chief Policy Officer Faryar Shirzad said existing securities laws may not fit cryptocurrencies.

CEO Brian Armstrong’s stated goal of listing every token the exchange legally can appears to have had its drawbacks: According to two people interviewed by Bloomberg, the SEC gave Coinbase’s practices a closer look amid the increase in token listings.

Coinbase’s asset directory page featured over 200 tokens at press time Monday.

Coinbase Chief Legal Officer Paul Grewal said in response to a CoinDesk query, "We are confident that our rigorous diligence process – a process the SEC has already reviewed – keeps securities off our platform, and we look forward to engaging with the SEC on the matter."

"The SEC does not comment on the existence or nonexistence of a possible investigation," an SEC spokesperson told CoinDesk in an email.

UPDATE (July 26, 2022, 03:40 UTC): Adds comment from Coinbase Chief Legal Officer Paul Grewal.

UPDATE (July 26, 2022, 16:50 UTC): Adds comment from SEC spokesperson.