On the same day that the Securities and Exchange Commission (SEC) filed a lawsuit against Coinbase, the New Jersey Office of the Attorney General and the Alabama Securities Commission took action against the cryptocurrency exchange.
New Jersey Issues Summary Cease and Desist Order
The New Jersey Bureau of Securities issued a Summary Cease and Desist Order and a $5 million penalty against Coinbase. The regulators allege that Coinbase offered unregistered securities through its staking offerings to New Jersey residents. Coinbase has been promoting a return of up to 6% in Alabama and up to 10% in New Jersey through its staking rewards program.
Alabama Issues Show Cause Order
The Alabama Securities Commission (ASC) issued a show cause order to Coinbase. The company has 28 days to justify why it should be allowed to continue operating in the state. More than 33,000 Coinbase accounts are held by Alabama investors, and approximately 145,270 accounts are held by New Jersey investors. The regulators in both states are focusing on protecting state investors and ensuring that they are fully aware of the risks involved in these investments.
Investor Protection in Question
Coinbase’s staking rewards program accounts are not insured by the Federal Deposit Insurance Corporation (FDIC) or Securities Investor Protection Corporation (SIPC). This leaves investors with no protection from loss, according to officials. Shirley Emehelu, Executive Assistant Attorney General at New Jersey, emphasized that “the cryptocurrency securities market is not a free-for-all where companies can make up their own rules.”
The actions taken against Coinbase by New Jersey and Alabama regulators are aimed at ensuring that investors in cryptocurrency products are offered the same protections under the law. The regulators are working to eliminate any confusion surrounding cryptocurrency investments and protect investors from any potential losses.