Coinbase, the prominent cryptocurrency trading platform in the United States, finds itself entangled in a legal dispute with the US Securities and Exchange Commission (SEC).

The SEC filed a lawsuit on Tuesday, alleging that Coinbase has been operating without proper registration, violating regulations established to protect investors and ensure market integrity.

The repercussions of this lawsuit have rippled through the cryptocurrency market, affecting not only the global crypto landscape but also Coinbase’s stock value. It has raised concerns about the broader implications for the industry as a whole.

In its complaint filed with the Manhattan federal court, the SEC contends that Coinbase has been acting as an unregistered broker since around 2019, breaching disclosure requirements that are designed to safeguard investors.

Furthermore, the regulator asserts that Coinbase’s services, including Coinbase Prime and Coinbase Wallet, facilitated cryptocurrency transactions without obtaining the necessary authorization.

SEC Chair Gary Gensler emphasized the seriousness of Coinbase’s alleged failures, highlighting that they have deprived investors of essential protections against fraud, manipulation, conflicts of interest, and routine inspections.

During an interview with CNBC, Gensler questioned the operational models of crypto trading platforms, underscoring their multifaceted functions that extend beyond traditional exchange activities. He drew a parallel, pointing out that the New York Stock Exchange does not engage in hedge fund operations.

Following the news of the SEC lawsuit, Coinbase’s stock value took an immediate hit, experiencing a significant decline during premarket trading after the lawsuit was filed.

The legal action against Coinbase follows the recent SEC lawsuit against Binance, the largest cryptocurrency exchange globally, and its founder, Changpeng Zhao. This intensifies the scrutiny on the industry as regulatory authorities increase their focus.