Coinbase's (COIN) stock slumped as much as 20% in early trading Thursday before paring some of the losses, after the crypto exchange disclosed that the U.S. Securities and Exchange Commission said the company may be violating securities laws.
On Wednesday, the SEC issued Coinbase a Wells notice, which informs businesses that it is planning future enforcement action against them. Coinbase said in a filing with the SEC that it believes any action "would relate to aspects of the company’s spot market, staking service Coinbase Earn, Coinbase Prime and Coinbase Wallet."
Wells notices don't always lead to enforcement actions. Coinbase has until March 29 to advise the SEC whether it intends to rebut the agency's findings.
Allegations of selling unregistered securities levied at crypto companies by the SEC have been commonplace in recent years, with Chairman Gary Gensler regularly voicing that opinion.
The Wells notice to Coinbase came on the same day the SEC sued Tron founder Justin Sun for the sale of unregistered, securities among other charges.
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