The US Securities and Exchange Commission (SEC) has issued a Wells notice to Coinbase, notifying the cryptocurrency exchange of potential securities law violations that might result in a civil lawsuit with injunctive relief, disgorgement, and civil penalties.

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A SEC Wells Notice is a notification sent by the Securities and Exchange Commission to inform individuals or companies of potential legal action being taken against them, it is one of the last measures before the SEC pursues formal charges. Once the news broke, Coinbase shares plummeted 12% in extended trading.

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Coinbase, however, labelled the inquiry as "preliminary" and claimed that business will continue as usual. Moreover, Coinbase is seeking regulatory clarity and believes its assets and services are legitimate.

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