Shares of Coinbase Global Inc. dropped 15.8% in the extended session Wednesday after the crypto exchange disclosed a warning from regulators that it may have broken securities laws.
said it received a Wells notice from the Securities and Exchange Commission, which could lead to formal charges.
“We asked the SEC for reasonable crypto rules for Americans. We got legal threats instead,” Coinbase said in a blog post detailing the action. “Rest assured, Coinbase products and services continue to operate as usual — today’s news does not require any changes to our current products or services.”
Based on discussions with the SEC, Coinbase said that the potential charges relate to the company’s spot market, its staking service Coinbase Earn, Coinbase Prime and Coinbase Wallet.
The crypto exchange said it asked the regulators to detail which assets in its platforms the SEC believes may be securities, but the SEC declined to do so. Coinbase called it a “cursory investigation.”
SEC representatives declined to comment Wednesday.
The company said that the investigation is “still at a very early stage,” and that it has turned in documents and provided two witnesses for testimony, “one on the basic aspects of our staking services and one on the basic operation of our trading platform.”
Coinbase has said that its staking services are not securities.
Regulators have doubled down on efforts to increase oversight of the crypto industry, shutting down crypto exchange Kraken’s staking program in February and issuing a Wells notice to warn stablecoin issuer Paxos.
Staking allows users to earn rewards by using their existing holdings of tokens to verify transactions.
Shares of Coinbase ended the regular trading day down 8.2%.