SEC sues Binance and Coinbase, escalating its campaign against crypto exchanges

The Securities and Exchange Commission sued Coinbase on Tuesday, a day after filing a lawsuit against Binance and its founder Changpeng Zhao. Both complaints allege the companies operated as unregistered exchanges, brokers and clearing agencies.

The Binance case includes additional allegations related to the handling of customer funds and the relationship between its US and international operations. Binance has said it will defend itself vigorously. Coinbase, a publicly traded company, has argued that the rules for crypto are unclear and that it has sought guidance from the regulator.

The lawsuits name a number of tokens that the SEC considers to be securities. Prices of several of those tokens fell after the filings.

The cases put a central question before the courts: whether most crypto tokens are securities under existing US law. The industry argues that Congress should write new rules, while the SEC maintains that current law already applies. What to watch:

• How courts rule on the status of the named tokens
• Whether Congress advances market structure legislation
• Whether trading activity moves to exchanges outside the US

The lawsuits also have a political dimension. Crypto regulation has become a partisan issue in Washington, and the cases are likely to be part of the debate ahead of next year's elections.