Do Investors Need To Worry About Coinbase Getting Sued?

It looks like the SEC is coming after Coinbase with a hefty lawsuit, but do investors really need to worry, or will this one blow over?

It’s been a tough first few months on the public markets for Coinbase (NASDAQ: COIN), its stock falling more than 20% since directly listing on the Nasdaq back in April. 

And now, weeks before launching a brand new product, the Securities and Exchange Commission (SEC) is coming at Coinbase with a lawsuit.

What’s this suit all about?

Well, it looks like the SEC is pretty worked up about Coinbase’s upcoming interest-earning product, Coinbase Lend. 

In Coinbase’s words, this service:

“Lend allows users to earn a 4% annual percentage yield on a so-called [cryptocurrency] stablecoin (USD Coin) by allowing Coinbase to lend those funds to verified borrowers. Coinbase backs USD Coin and guarantees that it can always be redeemed for $1.”

 You can read more about this on our blog post here, but the short of it is this: 

The SEC considers Lend to be a security transaction — securities lending is the practice of loaning shares of stock, commodities, derivative contracts, or other securities to other investors. However, Coinbase disagrees with this classification, considering it a non-security instead as cryptocurrency is not considered a security. It also claims to have been upfront with the SEC in this regard.

As a result of all this confusion, Coinbase Lend’s launch has been delayed until at least October. 

The issue for investors now is whether the SEC has got something to come at Coinbase with, or whether this will blow over? After all, it’s already down 3% based on reports alone, what happens if the suit is successful? 

Unfortunately, these are some of the tribulations that many investors can face during their portfolio’s lifespan. However, it is still very early days yet, and if you’re bullish on Coinbase, then it’s definitely too soon to tell where this could go just yet, but it’s certainly worth keeping a close eye on.

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