file photo SEC Chair Gary Gensler
the staff of the Ridgewood blog
Ridgewood NJ, Coinbase has responded to the SEC’s Wells notice, asserting that they have not changed since being allowed to go public two years ago and still do not list securities. They seek SEC compliance to register for listing securities in the future. Coinbase makes clear that it will continue building its platform, seek legislation from Congress, and request SEC rulemaking for clearer crypto regulation.
The SEC indicated to Coinbase in the Wells notice in March that its spot trading, staking, custody and institutional trading businesses were at risk. The SEC’s warning to Coinbase noted that the regulator would allege Coinbase was offering and selling unregistered securities, in violation of federal law.
Coinbase told the Securities and Exchange Commission, that an enforcement action against the crypto exchange would pose “major programmatic risks” to the SEC that would “fail on the merits.”
“Coinbase does not list, clear, or effect trading in securities,” the company’s response said. The analysis SEC staffers did to justify an enforcement action “appears to rest on superficial and incorrect analogies to products and services offered by others,”
An SEC Wells Notice is a letter sent by the Securities and Exchange Commission (SEC) to an individual or company informing them that the SEC is considering taking enforcement action against them for alleged violations of securities laws. The notice typically includes a summary of the SEC’s investigation and the specific allegations being made against the recipient.
Receiving a Wells Notice is a serious matter and typically indicates that the SEC has already conducted a thorough investigation into the matter and has evidence of potential violations. The recipient of the Wells Notice is given an opportunity to respond to the allegations and present their side of the case before the SEC makes a final decision on whether to pursue enforcement action.
It is important to note that a Wells Notice does not mean that the SEC has made a final determination of wrongdoing or that enforcement action will necessarily be taken. However, it is a strong indication that the SEC believes there is enough evidence to pursue an enforcement action.