The crypto exchange platform’s shares have fallen almost 10% over news that it is being sued by the SEC, should you sell the stock?
Sept. 8, 2021
According to reports, the newly-listed company has received notice of potential enforcement action from the Securities and Exchange Commission (SEC). The issue in question relates to Coinbase’s (NASDAQ: COIN) interest-earning product, Coinbase Lend, which the business had intended to roll out in the coming weeks.
In pre-market trading, Coinbase shares are down over 3% at the time of writing. Last month, Coinbase reported solid results for the second quarter but shareholders were still unhappy, mainly with its announcement that the business expects trading volume to slow down for the rest of the year. Now with this bad news, things aren’t looking great for the stock.
Why is Coinbase being sued?
It’s not exactly clear what the SEC is suing the organization for but according to sources, it is definitely related to Coinbase Lend. This service hoped to allow its users to make a 4% yearly percentage yield on a stablecoin (USD Coin), Coinbase then lends these funds to verified users. The company backs this stablecoin and promises that they will always redeem it for $1.
Chief legal officer at Coinbase, Paul Grewal, stated that they were caught off guard by the notice and explained that the firm had made efforts to contact the regulatory agency over the last six months. CEO, Brian Armstrong, also tweeted that when he went to Washington, D.C. in May, the SEC “refused” to meet him. Armstrong explained:
“We’re committed to following the law. Sometimes the law is unclear. So if the SEC wants to publish guidance, we are also happy to follow that.”
According to sources, the product’s debut has been postponed until at least October.
Should I see my Coinbase stock?
Coinbase is a leader in the crypto exchange market and this news should not overly concern shareholders. If the company does get sued, Coinbase should be able to pay it and make any alterations to the product if needed.
While the delay in the release is not the best news, investors should at least wait and see if the case even goes ahead. In any case, one challenge like this should not put you off Coinbase if you bought the stock with a long-term investing style in mind.
Crypto exchanges not your preferred investment type? Well, you’re in luck because MyWallSt has got a shortlist of market-beating stocks so you can get on the path to financial freedom. Start your free access now.