Below is a short and simplified BREAKDOWN of this document.

INTRO

The complaint names two defendants:

• Coinbase Inc.

• Coinbase Global Inc.

ALLEGATIONS

The complaint consists of allegations regarding a.i.:

• operating as an unregistered exchange, broker-dealer & clearing agency

• unlawfully combining these three roles

• selling & promoting unregistered securities

• violating disclosure requirements

According to the SEC:

• by offering crypto assets on its platform Coinbase became an unregistered broker.

• by gathering crypto buyers & sellers and managing their orders Coinbase became an unregistered exchange, and

• and by holding customer assets in Coinbase-controlled wallets and settling transactions Coinbase became an unregistered clearing agency

On top of that, the SEC claims that the Conibase staking program was, in fact, an investment contract (security) because it allows investors to earn financial returns through Coinbase’s MANAGERIAL EFFORTS”.

The complaint suggests that Coinbase has made “CALCULATED BUSINESS DECISIONS” to make unregistered securities available for trading.

The SEC suggests that Coinbase prioritized profits over investors and regulatory compliance, disregarding investor protection & regulations.

REQUESTED REMEDIES

The SEC wants a judgment that:

• permanently stops Coinbase from violating securities laws,

• orders disgorgement of ill-gotten gains with INTERESTS,

• imposes civil penalties, and

• provides equitable relief for investors.

INTERESTING DETAILS

• CRYPTO-CRYPTO TRADING

What is very interesting in the complaint is the SEC's take on crypto-crypto trading.

This complaint is another document in which the SEC claims that exchanging one crypto asset, which is considered a security, for another, it transforms the latter into a security as well.

It makes the whole crypto industry unregulated.

This logic makes DEX protocols unregulated entities (perhaps even unregulated clearing agencies) under securities laws as well.

• CRYPTO ASSETS LABELED SECURITIES

In another section of this complaint, the SEC names the following crypto as crypto assets securities:

$SOL, $ADA, $MATIC, $FIL, $SAND, $AXS, $CHZ, $FLOW, $ICP, $NEAR, $VGX, $DASH, and $NEXO

• TOKEN BURNING MECHANISM & FRACTIONAL TOKENS

In the major part of the complaint, the SEC tries to explain why each token may be considered a security.

For instance, buyback and burning is considered a factor making a token a security,

The SEC also claims that the fact that users can buy a fraction of the token is the argument for the claim that it may be considered a security.

• UX DESIGN AS A TRADING PLATFORM

Another worth noting element of the complaint is the SEC argument relating to Coinbase UX design.

The SEC claims that one of the arguments for Coinbase being a registered exchange is the UX of the Coinbase trading platform resembles the UX of registered exchanges.

For instance by the display of charts and order books.

• THE REPORT

The SEC also claims that Coinbase, despite conducting its risk assessment and being aware of the "Howey test" as indicated in its report, should have considered the crypto assets it listed as securities.

CONCLUSIONS

The SEC lawsuit against Coinbase appears to be an example of a coordinated effort to undermine the crypto industry.

Once again, a government institution is causing disruption in the market.

Unlike the recent complaint against Binance, this lawsuit focuses more on legal aspects rather than sensational factual details.

It holds greater significance for the entire crypto industry, as it reveals the direction the SEC wants to take.

Day before the complaint against Coinbase, the SEC filed a complaint against Binance

If you are interested in reading the breakdown of the SEC’s complaint against the complaint, here is my article:

Let’s Connect

I am Jack.

I am an ex-lawyer and the founder of a web3 project.

I spent thousands of hours analyzing web3 projects, in particular in the NFT space and building my own venture.

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