The Securities and Exchange Commission intends to sue Coinbase over a planned interest-earning product, says the cryptocurrency exchange.
Last week, the SEC sent Coinbase a Wells notice warning that it intends to sue in court over the planned Lend programme, says the company's chief legal officer Paul Grewal, in a blog.
News of the Wells notice sent Coinbase shares down more than three per cent in premarket trading on Wednesday.
In a 21 tweet-long thread, Coinbase CEO Brian Armstrong accuses the SEC of some "really sketchy behavior," adding that the watchdog refused to meet with him in Washington earlier this year.
Coinbase had planned to launch Lend in the next few weeks after nearly six months of "proactively engaging" with the SEC, says Grewal.
The programme would let eligible customers earn interest on select assets on Coinbase, starting with four per cent APY on USD Coin.
Grewal claims that the firm could have "simply launched" Lend without approaching the SEC and that other crypto companies "have had lending products on the market for years".
"The SEC told us they consider Lend to involve a security, but wouldn’t say why or how they’d reached that conclusion," says Grewal.
In addition, the watchdog "asked for the name and contact information of every single person on our Lend waitlist," says Grewal, adding that Coinbase has not handed over the information.
The SEC has not commented on the issue.