Coinbase stays resolute as smaller players give in to U.S. hawks

• Bankrupt exchange Bittrex agreed to pay a $24 million fine to settle with the regulator.
• Coinbase refused to accept the SEC’s terms and challenged them in court.

The United States Securities and Exchange Commission (SEC) had crypto entities operating in the country in its crosshairs in 2023, resulting in a flurry of litigation and investigations.

Market participants and experts have criticized the agency’s high-handedness, with some going so far as to label its recent actions as a coordinated effort to stem the growth of digital assets.

While the larger players have stayed firm and pursued legal action, some of the smaller entities are toeing the line.

Bittrex bows out

In a press release, the SEC announced that cryptocurrency exchange Bittrex agreed to pay a $24 million fine to settle a case with the regulator. The U.S.-based trading platform was sued by the agency in April over allegations of running an unregistered securities exchange.

Recall that bigger exchanges like Binance [BNB] and Coinbase [COIN] have been hit by similar lawsuits.

Furthermore, the complaint stated that Bittrex and former CEO William Shihara asked crypto issuers to delete statements from public forums, which might lead to a financial regulator probe. According to the SEC, Bittrex has neither admitted to nor denied the allegations.

The $24 million settlement included disgorgement of $14.4 million, prejudgment interest of $4 million, and a civil penalty of $5.6 million.

The development comes three months after the crypto exchange filed for bankruptcy protection. According to the filing, the exchange had more than $500 million in assets and liabilities, as well as more than 100,000 creditors.

Prior to the bankruptcy filing, the bruised trading platform had shut down its operations in the U.S., blaming the country’s regulatory and economic environment. One of the co-founders Richie Lai expressed his sentiments while making the exit, saying:

“In the end, we made great strides toward accomplishing our goal of maturing the crypto space. However, operating in the U.S. is no longer feasible and Bill, Rami and I will focus on helping Bittrex Global succeed outside the U.S.”

A gloomy landscape all around

In a similar case of capitulation, cryptocurrency exchange Bitstamp suspended the trading of seven tokens for its U.S. customers, previously identified as securities by the SEC. The suspension covered some of the major altcoins operating in the market, such as Polygon [MATIC] and Solana [SOL].

The Europe-based trading platform added that the suspension would be effective from 29 August and all existing orders across the listed trading pairs would be cancelled.

Although Bitstamp did not directly connect the decision to the SEC’s stance on altcoins, it did consider the “dynamic regulatory environment” before moving forward.

Bitstamp, founded in 2011, is one of the oldest trading platforms operating in the crypto landscape. According to a recent report by Bloomberg, the exchange was raising funds to increase its presence in the European and Asian markets.

The absence of any long-term expansion plans relating to the United States could not have been more glaring.

Binance.US, the American arm of the world’s largest crypto exchange Binance, also wilted under regulatory pressures. Following the lawsuit in early June, the exchange pulled out a total of 10 trading pairs, involving Bitcoin [BTC] and Binance USD [BUSD].

Coinbase’s last stand

Coinbase, the largest crypto trading platform in the U.S., has refused to accept the SEC’s terms and fiercely denied the claims brought against it by the regulator. The exchange recently submitted a brief to a U.S. district court asking for the dismissal of SEC’s allegations against the former.

Today, @coinbase filed our brief asking the Court to dismiss the SEC’s case against us. Our core argument is simple — we do not offer "investment contracts" as that term has been construed by decades of Supreme Court and other binding precedent. 1/3 https://t.co/r2EkDgkEuc

— paulgrewal.eth (@iampaulgrewal) August 4, 2023

The core argument, as pointed out by the company’s top legal officer, was that transactions on Coinbase were not investment contracts. This is because the purchaser received no share of the company’s income, earnings, or assets.

Coinbase accused the SEC of ignoring historical precedents around investment contracts and abusing its jurisdiction.

CEO Brian Armstrong dropped a bombshell a few days back when he revealed that the SEC had asked Coinbase to cease trading of all cryptos other than Bitcoin. Considering Coinbase’s market share, a move like this could have had damaging effects on the wider crypto market.

However, Armstrong said that Coinbase opted to pursue legal action to seek clarity from the court on the matter.