SEC Sue Coinbase Lend Yield Product

Bitcoin exchange Coinbase’s new Lend program is facing strong opposition from the U.S. Securities and Exchange Commission (SEC), which called the product a securities offering. Coinbase Chief Legal Officer Paul Grewal published a blog post today saying that the SEC will sue the company if it launches Lend, claiming the regulatory agency lacks clarity. The situation was also explained by Coinbase CEO Brian Armstrong in a lengthy Twitter thread, highlighting the company’s policies and the back-and-forth communication with the SEC.

“We were planning to go live in a few weeks, so we reached out to the SEC to give them a friendly heads up and briefing,” said Armstrong, referring to his company’s new Lend product. “They responded by telling us this lend feature is a security…and then tell us whey will be suing us if we proceed to launch, with zero explanation as to why.”

However, some disagree with Coinbase’s remarks that the SEC hasn’t clarified why lending is a security. Additionally, the U.S. Supreme Court ruled in 1982 that the meaning of a security is context-dependent. Paired with the fact that the U.S. legal system relies on case law, by inferring that cryptocurrency lending is a security and providing the case, the SEC could be, in theory, also providing the reason.