During the week of June 5, 2023, the U.S. Securities and Exchange Commission (SEC) filed charges against two major crypto companies — Coinbase and Binance.

What’s In the Coinbase Case?

Both cases allege that the exchanges violated securities law by listing certain crypto assets — including major coins like Solana (SOL), Cardano (ADA), and Polygon (MATIC).

The SEC specifically alleges that Coinbase knowingly listed assets that could be considered securities due to its lead role in operating an asset evaluation framework. The regulator also claims that Coinbase's staking services constitute a securities offering. Furthermore, the SEC says that Coinbase’s stock listing, which it approved in 2021, does not represent support for Coinbase’s other services.

Coinbase CEO Brian Armstrong responded that his firm has repeatedly attempted to register with the SEC but that there is no path to accomplish this. He denied that Coinbase lists securities and criticized the SEC for “regulating by enforcement.”

Action against Coinbase has been expected for months, as the company received a Wells Notice in March. Such notices typically precede SEC action.

What’s In the Binance Case?

The SEC alleges Binance listed a similar set of crypto securities, that Binance's BUSD and BNB tokens are securities, and that Binance.US’s staking service is a security.

The regulator also alleges that members of Binance helped customers circumvent geographic restrictions and that the company's U.S. operations were highly connected to its global operations. Binance CEO Changpeng Zhao was also named as a defendant and was described as being involved in those affairs.

The SEC also said that Binance’s U.S. companies committed fraud by overstating their platform's protections against wash trading and reporting inaccurate trading volumes.

Binance responded by stating that it takes the SEC's allegations “seriously” and that it will defend itself. Like Coinbase, Binance said that it previously attempted to engage in discussions with the SEC; it criticized the SEC for regulating by enforcement.

What Happens Next?

The SEC seeks injunctions or restraints, as well as fines and penalties, against the companies and associated parties named in each case.

So far, Binance.US has announced that it will delist several trading pairs and pause OTC trading. These service halts do not apply to Binance.com’s global service. Earlier, the SEC requested that courts impose a restraining order on Binance.US to freeze its assets; this has not been granted as of June 7.

Coinbase executives, meanwhile, have stated that they do not plan to delist cryptocurrencies named in the case, nor do they plan to halt their staking service.

Each company must now defend itself against the SEC in court. Coinbase additionally says that it will continue to petition the SEC for rulemaking in parallel legal proceedings.