Wall Street's top regulator is confronting some of the biggest names in crypto over their alleged violations of US securities laws, in a regulatory crackdown that is already roiling the digital asset industry.
On Tuesday, the US Securities and Exchange Commission sued Coinbase, America's largest crypto exchange, for allegedly acting as an unregistered broker. That complaint landed just 24 hours after filing a similar suit against overseas rival Binance.
"Since at least 2019, Coinbase has made billions of dollars unlawfully facilitating the buying and selling of crypto asset securities," the SEC said in a press release. "Coinbase intertwines the traditional services of an exchange, broker, and clearing agency without having registered any of those functions with the Commission as required by law."
Coinbase's failure to register "has deprived investors of significant protections," the SEC said.
Coinbase did not immediately respond to a request for comment from CNN.
Shares of Coinbase tumbled 14% Tuesday morning.
The Coinbase lawsuit comes on the heels of a similar SEC complaint against Binance, which is by far the world's biggest crypto exchange. In the 24 hours since the agency sued Binance, investors pulled around $790 million from the platform and its US affiliate, data firm Nansen said Tuesday.
Binance saw net outflows of $778.6 million of crypto tokens on the ethereum blockchain, with its US affiliate, Binance.US, registering net outflows of $13 million, Nansen tweeted.
A spokesperson for Binance on Monday said the company takes the SEC's allegations seriously, but it believes the agency's accusations are "unjustified," and that the company is being targeted because of its size and name recognition.
The growing regulatory crackdown is rattling crypto investors, who remain shaken by the implosion late last year of FTX, a rising star that flamed out spectacularly and is now the subject of a massive federal fraud investigation. Since then, digital asset prices have tanked and regulators have stepped up their scrutiny of the industry.
Crypto companies have long resisted having their products classified as traditional securities or commodities, arguing that they are a wholly new kind of digital asset that require bespoke rules and regulations. The SEC disagrees, and has often said that most crypto offerings are securities that should be regulated the same way stocks and bonds on Wall Street are.
The lawsuits against two of the biggest names in crypto could help force the regulation issue by sparking litigation and, ultimately, judicial reviews that motivate Congress to act.
"This litigation may not be a positive for Coinbase, but it should be a positive for the crypto space," analysts at TD Cowen wrote Tuesday. "It should get crypto closer to final rules of the road regardless of how the judge rules."