Why Coinbase Shares Are Trading Lower Today

Coinbase Global Inc (NASDAQ: COIN) is trading lower Wednesday after the company announced it received a "Wells Notice" from the Securities and Exchange Commission.

A Wells Notice is the formal way for a regulator to inform a company that it intends to sue. 

Coinbase said the Wells Notice is in regard to its Lend program, which would allow Coinbase users to earn interest by lending their crypto assets.

Coinbase said its Lend program doesn't qualify as a security, or an investment contract. 

"The SEC told us they consider Lend to involve a security, but wouldn’t say why or how they’d reached that conclusion," said Paul Grewal, chief legal officer of Coinbase, via the Coinbase blog.

"Despite Coinbase keeping Lend off the market and providing detailed information, the SEC still won’t explain why they see a problem. Rather they have now told us that if we launch Lend they intend to sue," Grewal said. "Yet again, we asked if the SEC would share their reasoning with us, and yet again they refused."

As a result of the Wells Notice, Coinbase said it will not be launching its planned Lend program until at least October. 

The company said it "continues to welcome additional regulatory clarity."

COIN Price Action: Coinbase has traded as high as $429.54 and as low as $208 since its direct listing on April 14. 

The stock was down 3.87% at $256.49 at time of publication.

Photo: courtesy of Coinbase.