Today, we are disappointed to share that the SEC gave us a “Wells notice” regarding an unspecified portion of our listed digital assets, our staking service Coinbase Earn, Coinbase Prime, and Coinbase Wallet after a cursory investigation. A Wells notice is the way that SEC staff tells a company that they are recommending that the SEC take enforcement action for possible violations of securities laws. It is not a formal charge or lawsuit, but it can lead to one. Rest assured, Coinbase products and services continue to operate as usual – today’s news does not require any changes to our current products or services.
Today’s Wells notice does not provide a lot of information for us to respond to. The SEC staff told us they have identified potential violations of securities law, but little more. We asked the SEC specifically to identify which assets on our platforms they believe may be securities, and they declined to do so. Today’s Wells notice also comes after Coinbase provided multiple proposals to the SEC about registration over the course of months, all of which the SEC ultimately refused to respond to.
Although we don’t take this development lightly, we are very confident in the way we run our business – the same business we presented to the SEC in order for us to become a public company in 2021. We continue to think rulemaking and legislation are better tools for defining the law for our industry than enforcement actions. But if necessary, we welcome the opportunity for Coinbase and the broader crypto community to get clarity in court. Below we share more details on our attempts to engage with the SEC on registration paths, the current U.S. crypto regulatory confusion, and another reminder that Coinbase doesn’t list securities.