Coinbase Global Inc. (COIN), the largest crypto exchange in the United States, saw a sharp drop in its shares on Thursday morning following an announcement that the U.S. Securities and Exchange Commission (SEC) may take legal action against the exchange over its products.

SEC Claims Violation of Securities Law

The SEC has alleged that Coinbase’s products violate securities law and has indicated that it may initiate legal action against the exchange. As a result, the value of Coinbase’s shares fell by nearly 20% early on Thursday.

Wells Notice Issued to Coinbase

Coinbase Global Inc. has received a Wells notice from the SEC, indicating that the agency is planning to sue on the grounds that the crypto exchange’s tokens and other products, including its staking service Coinbase Earn and Coinbase Wallet, are securities that should be registered. This is the latest in a series of actions taken by regulators against the crypto industry.

Regulatory Pressure Mounting

The notice issued by the SEC is just one of the many regulatory challenges that have been issued against crypto firms. The industry remains largely unregulated, and regulators have been increasing their scrutiny of crypto-related products and services.

Coinbase Remains Confident

Despite the SEC’s action, Coinbase Global Inc. has stated that it will continue to operate as usual, and the company is confident in the legality of its assets and services. In a statement, Chief Legal Officer Paul Grewal said that the company hopes legal action would clarify the SEC’s stance on crypto, which it claims is divided within the commission. The company believes that the SEC has not been fair or reasonable when it comes to its engagement on digital assets.

CEO Brian Armstrong’s Response

In response to the notice, Coinbase CEO Brian Armstrong tweeted that the company is confident in the facts and right on the law. He also stated that Coinbase welcomes the opportunity to get before a court, as it would provide clarity and demonstrate that the SEC has not been fair or reasonable in its engagement on digital assets.

SEC Targeting Other Companies

Coinbase Global Inc. is not the only company to be targeted by the SEC. Other firms, such as Kraken and Paxos Trust Co., have also received Wells notices. The regulators have also targeted Tron founder Justin Sun and eight celebrities for allegedly manipulating markets and violating federal securities law, reigniting arguments about whether crypto is a security that falls under the SEC’s jurisdiction.

Conclusion

The crypto industry is facing increasing regulatory pressure, and Coinbase Global Inc. is the latest company to feel the impact. Despite the SEC’s actions, Coinbase remains confident in the legality of its assets and services and hopes that legal action will provide clarity on the SEC’s stance on crypto. As the industry continues to evolve, it remains to be seen how regulators will respond to the challenges presented by cryptocurrencies and related products and services.