Benzinga - Even as crypto exchange Coinbase Global Inc (NASDAQ: COIN) faces the Securities and Exchange Commission's notice against it, the crypto exchange has found itself at the heart of a regulatory storm as 10 U.S. states have initiated legal proceedings against it for allegedly violating securities regulations.
The states, spearheaded by the Alabama Securities Commission, have served the digital currency exchange with a show cause notice, allotting a 28-day window to justify why it should not be slapped with a stop-order.
The list of states that have joined forces to issue this legal notice includes Alabama, California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington, and Wisconsin.
In light of this development, Coinbase is in peril of receiving a cease-and-desist order pertaining to the sale of unregistered securities.
In a pivotal move earlier this year, the SEC served Coinbase with a Wells Notice, alleging its violation of federal securities law.
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As the recent unfolding suggests, this warning has come to bear fruit, with the SEC formally charging the company with these violations.
This development has turned the spotlight on Coinbase, prompting state-level regulators to shift their focus to the company's operations.
The Alabama Securities Commission has publicized the show cause notice, revealing its contents and the states involved. The notice highlights Coinbase's alleged contravention of securities laws through its "staking rewards program accounts" offered to the citizens of these states.
Coinbase's situation mirrors that of Binance, another major exchange that has faced similar charges.
In the wake of these regulatory actions, the shares of both companies have experienced significant dips.
Since the SEC lawsuit, Coinbase's stock value has plummeted by 17%, underlining the gravity of the ongoing legal challenges.
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