“This is a setback to the SEC,” said Brent Xu, CEO and co-founder of Umee. “The CFTC has essentially said that Coinbase is a fully legitimate actor in the United States at a time when the SEC is saying that the exchange is not.”
In the same week in June, the regulator aimed massive enforcement actions at both Binance and Coinbase, declaring their fundamental business models violated U.S. securities law. Now, the SEC is fighting a multifront court battle with crypto firms about how to define unregistered crypto securities and illegal exchanges.
Coinbase denied the SEC’s allegations, arguing that they shouldn’t even apply. The new CFTC status doesn’t offer any new legal defense for the company in that dispute.
But the derivatives agency allowing a crypto-native company to join the ranks of traditional firms is a sign that the SEC is “out of step,” said Zachary Townsend, co-founder and CEO of Meanwhile, arguing that the CFTC is “moving in the exact opposite direction” as its sister regulator.
Still, crypto skeptics in Congress and consumer groups welcome SEC scrutiny on the industry. Todd Phillips, a former government lawyer and consumer advocate who teaches at Georgia State University, said the CFTC allowing major crypto exchange Coinbase to also be an FCM is illustrating a danger common across the industry.
“There are big concerns when firms control transactions from soup to nuts,” Phillips said. “That applies to Coinbase as well as traditional firms like NYSE. Owning brokers, exchanges and clearinghouses can raise costs for traders and makes market manipulation more possible.”