Impact of SEC Lawsuit: Binance Fires Staff, Coinbase Loses Market Share to Robinhood

Updated: 16 June 2023

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In June, the SEC filed a lawsuit against Binance.US, along with its founder, Changpeng Zhao. In the suit, they accuse the company of creating “a web of lies” to evade the set securities laws, a move that has since made Binance.US come out in full gear to defend itself.

Following the lawsuit, a member who wished to remain anonymous due to the personal nature of the matter stated that Binance.US has laid off approximately 50 employees, including members of its legal, compliance, and risk departments.

Additionally, the SEC had earlier asked the court to put Binance.US finances on hold, noting the potential for financial dispersal. However, earlier this week, the judge rejected the plea, stating that a mutual settlement was in the best interests of both parties.

Coinbase Losing Market Share to Robinhood

The SEC also filed a lawsuit against Coinbase for violating U.S. securities laws by acting as an “unregistered broker, exchange, and clearing agency.” This action could be the root cause of the dip in the trading platform’s market share.

According to Dan Dolev, an analyst at Mizuho Securities, Robinhood may be gaining market share from Coinbase regarding retail crypto transaction volume following the suit.

https://t.co/N6Owd1ggB6

— dan dolev (@ddolev) June 14, 2023

“There is no perfect explanation for potential share losses aside from worries about regulatory pressures given SEC actions against crypto or the increase in small-ticket item retail trading fees at Coinbase,” shared Dolev.

Both Dolev’s study of the shareholder letter from Coinbase and the monthly metrics report from Robinhood suggest that either Coinbase is losing market share to Robinhood or their take rates (the amount of money they make from each transaction) have dropped.

The initial loss in Coinbase (NASDAQ: COIN) shares on Thursday was 5.5% due to a widespread decline in cryptocurrency stocks. The stock, though, essentially remained steady as the decline was later curbed. Despite this, shares of Coinbase have grown by about 50% this year. The stock price of Robinhood fluctuated insignificantly between gains and losses.

Dan Dolev believes that Robinhood Markets (NASDAQ: HOOD) is taking part in Coinbase Global’s (NASDAQ: COIN) retail cryptocurrency trading business, presumably as a result of COIN’s higher costs for small-ticket deals.

It’s not all bad news for Coinbase, either. In the realm of cryptocurrency trading, the platform continues to command a sizable market share. It has been working to develop and offer more thorough solutions for traders of all skill levels.

Will Coinbase Recover?

In addition to fighting the lawsuit from the Securities and Exchange Commission (SEC), the crypto company will also look for a legislative solution, the company’s top legal officer stated at an investor conference on Monday, June 12.

Last week, the SEC filed a lawsuit against Coinbase, the biggest cryptocurrency exchange in the nation, as part of a broader cryptocurrency crackdown that also includes legal action against Binance, the biggest cryptocurrency company on the planet. The commission accuses Coinbase of functioning as an unregistered exchange, brokerage, and clearinghouse.

Robinhood has also been dealing with its difficulties. The amount of cryptocurrency traded on the platform in May fell 68% from the previous month and 43% from the previous year. Robinhood’s daily average trading revenue decreased in May as well.

In an indication that the SEC litigation is already having an impact on the cryptocurrency market, on Friday Robinhood made an announcement that it was withdrawing three cryptocurrency tokens: ADA, MATIC, and SOL, from its platform. These tokens were recognized as securities by the SEC in its complaint against Binance and a separate action against Coinbase.