Crypto exchange Coinbase (NASDAQ:COIN) gave a strong response to last month’s Wells notice from the U.S. Securities and Exchange Commission (SEC), which it termed “vague and broad.” Through its written and video submission to the SEC, Coinbase contended that the federal regulator’s enforcement action would “fail on the merits,” as the company does not list, clear, or effect trading in securities.
“We do not relish litigation against the SEC, but we will vigorously defend ourselves – and stand up for the rule of law for everyone,” said the company’s chief legal officer Paul Grewal in a blog post.
In a letter to the SEC, the company said that an enforcement action by the regulator would pose “major programmatic risks to the commission.” Coinbase further said that the SEC’s list of proposed charges is based on three primary legal theories, which the company feels are “flawed and untested.” The SEC had alleged that Coinbase had operated illegally since at least 2018.
The company said that it at the time it went public, it had detailed discussions with the SEC about certain aspects of its business, which have not changed since then but have yet become the subject of the Wells notice. The SEC alleged that Coinbase’s staking service, Prime and Wallet offerings, and its general listing process violate federal securities law.
Since the FTX debacle last year, regulators have tightened the noose around crypto companies to protect investors. However, crypto companies argue that there is a lot of ambiguity when it comes to regulations for the crypto market. Coinbase said that it would continue to seek clarification about the legislation from Congress and the rules from the SEC to ensure that regulatory clarity isn’t left to the courts.
Is Coinbase a Buy, Sell, or Hold?
Despite regulatory pressures, Coinbase continues to expand its presence and recently secured a license to operate in Bermuda.
Wall Street is sidelined on Coinbase, with a Hold consensus rating based on eight Buys, seven Holds, and five Sells. COIN stock has surged 53% since the start of this year. The average price target of $65.81 suggests 21.5% upside from current levels.
