Cryptocurrency exchange Coinbase said Thursday that it has responded to a Wells Notice received from the Securities and Exchange Commission (SEC), urging the agency not to pursue enforcement action against the company for the SEC’s own sake.

Coinbase is the leading cryptocurrency exchange in the U.S. and became a publicly traded company when it was listed on the Nasdaq in 2021. The company argued that by allowing it to be listed on Nasdaq, the SEC implied that it did not think Coinbase’s business was unlawful.

“If the Commission had believed in April 2021 that Coinbase’s core businesses violated securities law, it would have been required by its own mandate to prevent the S-1 from becoming effective to protect the investing public,” the company wrote in its response.

Coinbase also warned the financial watchdog that it will likely sustain reputational harm from its “abrupt about-face,” if it tries to go after Coinbase because of the company’s efforts to comply with regulations and possibly discourage other companies from prioritizing compliance.


“The story that will be told is one of a company that [...] consistently tried to gain clarity on and comply with the law [...] by voluntarily providing the Commission with extensive information about its business, only to have that information used against it in a mystifying effort to extinguish major portions of its business,” Coinbase said in its response.

In response to the SEC’s Wells Notice, the company said its platform does not list securities, its Coinbase Wallet product does not constitute a broker, and the exchange’s staking services do not constitute a securities offering.

Now that Coinbase has responded to the Wells Notice, the ball’s in the SEC’s court, Coinbase’s Vice President of Litigation Katherin Minarik told Decrypt. She said the agency has up to six months from issuing a Wells Notice to decide if it wants to bring charges.

After SEC staff assesses Coinbase’s response, a recommendation will be made to the agency’s commissioners on whether to pursue enforcement action. If the agency wants to forge ahead with enforcement, it will be voted on by the commissioners, Minarik said.


It’s only natural that regulators are taking a closer look at actors in the digital assets space following the collapse of cryptocurrency exchange FTX last November, Minarik said, referencing the apparent mismanagement of FTX founder Sam Bankman-Fried that’s given way to a litany of criminal charges against crypto’s former wunderkind.

What’s unusual, she said, is that the SEC appeared to acknowledge it didn’t have the authority for enforcement actions against Coinbase in 2021 but has since changed its stance, despite a lack of regulatory developments.

“Nothing has changed in terms of the legislative authority that they have from Congress,” Minarik said. “There have been no new rules written about crypto, and yet they are proceeding on an enforcement path that they seem to believe was unavailable to them a couple of years ago.”

Not Coinbase’s Only Battle

When it reported earnings in February, the company said it expects to be a “net beneficiary” amid a “year of regulatory focus” in a letter to shareholders. The claim came weeks after the crypto exchange Kraken was fined over its staking business.

And Coinbase disclosed it had received a Wells Notice from the SEC just over a month later related to the exchange’s staking products, which Coinbase described as “vague and broad” in a press release on Thursday.

As regulators have stepped up their scrutiny of crypto firms, the San Francisco-based exchange has signaled it is willing to butt heads with the likes of the SEC.

The exchange announced late Monday that it was suing the SEC over Coinbase’s “petition for rulemaking,” sent to the regulator last July. The legal action aims to get the agency to respond to Coinbase’s plea for clearer crypto regulations.

A day later, Coinbase CEO Brian Armstrong drew attention to his participation in the “Stand with Crypto” campaign. Referencing the commemorative NFT separately, Coinbase said, “The community is clearly fired up about sensible crypto policy.”


At the same time, the exchange has increasingly set its sights abroad as the regulatory environment in the U.S. continues heating up, in line with concerns that some politicians have raised in terms of pushing innovation offshore.

“We do not relish litigation against the SEC, but we will vigorously defend ourselves,” Coinbase’s Chief Legal Officer Paul Grewal said in a press release on Thursday. “In the meantime, the financial system still needs updating, so we’ll continue building.”

Editor's Note: An earlier version of the article incorrectly spelled Katherine Minarik's name.

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