- Coinbase has been handed a Wells notice over its intended Coinbase Lend program
- The Wells notice tells companies that the SEC intends to sue them, in this case if Coinbase launches its lending platform
- Coinbase had tried to enlist the SEC’s help in building the platform but was allegedly ignored
The Securities and Exchange Commission (SEC) has warned Coinbase that if it launches its Coinbase Lend program then it will be met with legal action. The news, revealed overnight by Coinbase themselves, was used by Coinbase as evidence that the SEC is threatening legal action before laying down guidelines for companies to follow and says it sought advice from the SEC every step of the way throughout the creation of Coinbase Lend, only to be threatened with a lawsuit on the verge of launch.
Coinbase Tried to Enlist SEC Help
Coinbase explained in a blog post, entitled ‘The SEC has told us it wants to sue us over Lend. We don’t know why’, how last week they received a Wells notice which it explains is “the official way a regulator tells a company that it intends to sue the company in court”. What was worse, says Coinbase, was that the SEC didn’t explain why, leading Coinbase to assume it must have been to do with Coinbase Lend, their intended lending platform.
The blog post explained that Coinbase’s legal team has been “proactively engaging with the SEC about Lend for nearly six months”, eschewing the standard format of ‘launch first, face the firing squad later’ practiced by many companies in the cryptocurrency sector. It detailed how Coinbase had asked the SEC how to approach their platform but got very little back by way of guidance, so they moved slowly, eventually announcing Coinbase Lend in June.
This announcement prompted an investigation from the SEC, with Coinbase representatives explaining the plan in detail. This resulted not in further guidance from the SEC but a Wells notice which delays Coinbase Lend “until at least October”, although this sounds optimistic.
Legal Threat Makes a Mockery of Gensler’s “Talk To Us” Appeal
The lack of clarity and assistance from the SEC flies in the face of comments made just last week by its new chief Gary Genlser to the Financial Times:
“Talk to us, come in. There are a lot of platforms that are in operation today that would do better engaging and instead there is a bit of…begging for forgiveness rather than asking for permission.”
Clearly this is what Coinbase tried to do, and the response from the SEC could set a worrying precedent and lead crypto companies to doing the opposite of what Gensler wants.
