Coinbase Shares Fall 11% in Premarket as SEC Action Looms

After plummeting over 10% in Tuesday after-hours trading, shares of Coinbase dropped an additional 11% in the market pre-open on Wednesday, trading at $64.95 at the time of writing. The drop comes amid concerns over a possible legal enforcement action against Coinbase by the US Securities and Exchange Commission (SEC), which delivered a Wells notice to the crypto exchange yesterday.

Coinbase Facing Possible Legal Action Related to its Earn, Prime, and Wallet Products

Coinbase continued to dip in premarket trading Wednesday as investors grew anxious over a potential legal action against the crypto exchange by the SEC. Coinbase’s stock is down more than 10% ahead of the Wednesday market opening.

The securities regulator delivered a Wells notice to Coinbase yesterday, suggesting it plans to bring enforcement against the company. However, the notice does not always lead to charges, nor it means that the recipient has breached any laws.

According to the notice, the possible legal action would be related to Coinbase’s spot market, including its Earn, Prime, and Wallet products. These products continued to operate normally following the notice, the world’s second-biggest crypto exchange said in the blog post.

Coinbase CEO Compares the SEC to “Soccer Refs” in a Game of Pickleball

In response to the Wells notice, Coinbase CEO Brian Armstrong posted a Twitter thread, highlighting Coinbase’s strict review process regarding which assets get approved on the platform. He also sees the upcoming legal process as an opportunity for Coinbase to prove “that the SEC simply has not been fair, reasonable, or even demonstrated a seriousness of purpose when it comes to its engagement on digital assets.”

A Twitter user asked Armstrong to explain the situation in NFL terms. Armstrong replied to the question, comparing the SEC to “soccer refs” in a game of pickleball. He said the refs “can’t really agree on the rules of this new game, and one of them decides to change a call they made back in April 2021.”

Earlier this year, the SEC forced the crypto exchange Kraken to shut down its staking service and pay a $30 million penalty for allegedly violating US securities laws. According to the government agency, Kraken breached the rules by offering an unregistered crypto-staking program.

The SEC made similar allegations regarding Coinbase’s staking services in the past, but Armstrong has repeatedly asserted these services are not securities. Coinbase was also one of the companies that submitted an amicus brief last year to support blockchain company Ripple in its long-standing legal battle against the SEC.

This article originally appeared on The Tokenist