Coinbase shares plunged ahead of Wall Street’s opening bell on Tuesday as investors assessed what a lawsuit from the Securities and Exchange Commission (SEC) could mean for the leading U.S. cryptocurrency exchange.

Coinbase, which trades on the Nasdaq under the COIN ticker, saw its shares fall more than 18% to $48.53 during pre-market trading, extending losses it sustained after rival exchange Binance and CEO Changpeng Zhao were hit with a lawsuit from America’s securities watchdog the day before.

The SEC accused Coinbase of violating securities laws by acting as an unregistered exchange, broker, and clearing agency. Those accusations mirrored claims leveled against Binance on Monday, but the SEC did not accuse Coinbase of behavior such as commingling customer funds.

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Coinbase’s staking products, where customers can lock up their tokens like Ethereum for rewards, were also labeled unregistered securities offerings. The SEC’s enforcement action follows a Wells Notice the exchange received in March, warning the exchange its staking products run afoul of securities rules.

The SEC's double-tap of enforcement actions against two of crypto's largest centralized exchanges represents the latest chapter in the agency's crackdown on the digital assets industry. The regulator kicked its enforcement into high gear following the collapse of crypto exchange FTX last November. Other digital asset firms, such as U.S.-based exchange Kraken, have also faced enforcement actions from the SEC this year.

The SEC’s complaint claims that Coinbase has operated as an unregistered broker since at least 2019, long before the company became the first publicly traded cryptocurrency exchange. The process of going public, as Coinbase did in April 2021, requires firms to register as publicly-traded companies with the SEC.

Coinbase has argued that the SEC risks reputational harm by proceeding with charges against the company after having approved its S-1 filing to go public two years ago.

Unlike the SEC’s lawsuit against Binance, Coinbase CEO Brian Armstrong was not named as a defendant in the lawsuit. But the two lawsuits are similar in the sense that a slew of tokens trading on the platform, like Solana and Polygon, were labeled securities.

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Amid depressed trading activity on its platform after a pandemic-era boom, Coinbase has embraced services such as staking as a way to diversify the company’s revenue away from trading fees—but the SEC's lawsuit could change how viable or lucrative that shift will be.

Back when cryptocurrency prices were sky-high in late 2021, Coinbase’s stock price coasted on excitement for the digital assets space. However, its shares have since plummeted 86% from an all-time high of $357.39, set in November of that year.

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