The stock of cryptocurrency exchange Coinbase plunged more than 20% at the open on June 6. At the time of publication, shares have pared some losses and are currently trading at $50.14, compared to an intra-day low of $46.43. The company’s market capitalization currently stands at $13.7 billion.

The same day, the United States Securities and Commission filed a lawsuit against Coinbase, alleging the operations of an unregistered national securities exchange, broker and clearing agency and failing to register the offer and sale of its crypto asset staking-as-a-service program. SEC Chair Gary Gensler commented:

“Coinbase’s alleged failures deprive investors of critical protections, including rulebooks that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspection by the SEC.”

Simultaneous to the SEC announcement, a task force comprising 10 state security regulators from Alabama, California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington and Wisconsin issued a Show Cause Order against Coinbase. The order alleged that “Coinbase violates the securities law by offering its staking rewards program accounts to Alabama residents without a registration to offer or sell these securities.”

Under the order, Coinbase has 28 days to respond and show why they should not be directed to cease and desist from selling unregistered securities in Alabama.

On April 14, 2021, Coinbase stock debuted on the U.S. Nasdaq exchange. Shares are currently down 88% from their all-time high of around $435, achieved on the day of listing. As part of its listing requirement, the exchange had to file a Form S-1 to register with the SEC and gain the regulator’s approval.

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