In a striking turn of events, the Securities and Exchange Commission (SEC) has taken legal action against Coinbase, the leading cryptocurrency trading platform in the United States. The SEC, known for its stringent oversight, has filed a lawsuit alleging that Coinbase violated securities law by neglecting to register as a broker.

This move comes hot on the heels of the SEC’s recent lawsuit against Binance, the world’s largest cryptocurrency exchange, which faced allegations of mishandling customer funds and providing false information to American regulators and investors about its operations. The SEC’s lawsuit against Coinbase is a response to its substantial profit-making ventures in facilitating the sale of crypto assets, while simultaneously denying investors the necessary protections.

The complaint, submitted to a federal court in Manhattan, argues that Coinbase operated as an unregistered exchange, despite acknowledging the associated risks when it went public and acknowledging that certain products traded on its platform could be deemed securities by regulators.

Gurbir S. Grewal, the director of the SEC’s Division of Enforcement, firmly stated that disregarding rules based on personal preferences or a desire for alternative regulations is unacceptable due to the severe consequences for the investing public.

Coinbase, anticipating this legal action, has sought to change the narrative surrounding digital assets. The company’s chief legal officer, Paul Grewal, is scheduled to testify before a House committee today regarding a draft bill on crypto regulation introduced last week. Coinbase has publicly expressed its willingness to embrace regulation and cooperate with the SEC. However, the company has consistently criticized the agency, claiming that it relies on enforcement rather than effective regulation. Coinbase argues that legislative action would convey a message that lawmakers, rather than regulators, dictate the rules. Nevertheless, during the testimony, Mr. Grewal may find himself facing inquiries about the SEC’s case against Coinbase.

This lawsuit from the SEC marks the latest development in the regulator’s ongoing crackdown on the cryptocurrency market. The SEC’s scrutiny has gained momentum following the collapse of the FTX cryptocurrency exchange in November and the subsequent criminal charges against its founder, Sam Bankman-Fried.