The U.S. Securities and Exchange Commission (SEC) has sent a Wells notice to Coinbase, the largest cryptocurrency exchange in the U.S., warning the company over potential legal action related to some of its staking products and digital asset listings, Coinbase said on Wednesday. The same day it took legal action against Tron network founder Justin Sun.

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Fast facts

  • The SEC’s Wells notice, issued before potential enforcement action for alleged violations of securities laws, was made after “a cursory investigation” of some of Coinbase’s listed digital assets and crypto staking services Coinbase Earn, Coinbase Prime, and Coinbase Wallet, the company said.
  • “It is not a formal charge or lawsuit, but it can lead to one,” Coinbase said in the Wednesday statement. “Today’s Wells notice also comes after Coinbase provided multiple proposals to the SEC about registration over the course of months, all of which the SEC ultimately refused to respond to.”
  • Brian Armstrong, chief executive officer of Coinbase, tweeted on Thursday morning in Asia that the exchange runs a rigorous asset review process and has rejected more than 90% of assets that have applied to be listed on the platform.
  • “While we understand that this is all part of the journey to reforming our financial system, we are right on the law, confident in the facts, and welcome the opportunity for Coinbase (and by extension the broader crypto community) to get before a court,” Armstrong wrote in the tweet.
  • Also on Wednesday, the SEC took legal action against the Tron blockchain founder Justin Sun, charging him and his three firms for “the unregistered offer and sale of crypto asset securities Tronix (TRX) and BitTorrent (BTT).”
  • Last month, the SEC shut down U.S.-based crypto exchange Kraken’s staking programs for U.S. users, which drew criticism from SEC Commissioner Hester Peirce who called the approach “paternalistic and lazy.”

See related article: A house divided? SEC Commissioner Peirce attacks agency’s fines against Kraken exchange