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Coinbase Could be Sued by the SEC "The SEC has told us it wants to sue us over Lend. We don't know why."

By Emily Rella

Opinions expressed by Entrepreneur contributors are their own.

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The Securities and Exchange Commission gave Coinbase a Wells notice last Wednesday, saying the regulatory agency plans to sue the company over its planned interest-earning product called Coinbase Lend, which would allow users to earn a 4% annual percentage yield on a stablecoin, or USD coin, as Coinbase could lend the funds to verified borrowers.

Coinbase's Chief Legal Officer, Paul Grewal, posted a blog Tuesday night titled, "The SEC has told us it wants to sue us over Lend. We don't know why."

"As surprised as we were at the SEC's threat to sue without ever telling us why, we want to be transparent with you about the course of events leading up to it," Grewal told readers, adding that the company "has been proactively engaging with the SEC about Lend for nearly six months" and "could have simply launched the product" but decided not to.

Related: SEC Allows Coinbase to List Shares on Nasdaq

"This is far from the norm in our industry," he added. "Other crypto companies have had lending products on the market for years, and new lending products continue to launch as recently as last month. But Coinbase believes in the value of open and substantive dialogue with our regulators. So we took Lend to the SEC first."

In a series of tweets, Coinbase CEO Brian Armstrong said the SEC was exhibiting "sketchy behavior" and "refused" to meet with him when he traveled to the nation's capital in May.

"We're committed to following the law. Sometimes the law is unclear. So if the SEC wants to publish guidance, we are also happy to follow that," he wrote.

Shares of Coinbase fell 4% Wednesday morning. Grewal said in his post that the launch of Lend has been delayed "until at least October."

Emily Rella

Senior News Writer

Emily Rella is a Senior News Writer at Entrepreneur.com. Previously, she was an editor at Verizon Media. Her coverage spans features, business, lifestyle, tech, entertainment, and lifestyle. She is a 2015 graduate of Boston College and a Ridgefield, CT native. Find her on Twitter at @EmilyKRella.

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