Dividend Stocks

The SEC Takes on Crypto – Here’s What You Need to Know

It’s been a tough 24 hours for cryptocurrency investors.

News broke this morning that Coinbase Global, Inc. (COIN), one of the largest U.S. online cryptocurrency trading platforms, is being sued by the U.S. Securities and Exchange Commission (SEC).

You may remember Coinbase from its popular 2022 Super Bowl ad. It spent about $14 million to push folks to its platform and app, offering $15 in Bitcoin (BTC -USD) if they signed up for the platform before February 15. Shortly after the ad, the Coinbase site temporarily crashed due to a surge in online traffic. Chief Product Officer, Surojit Chatterjee tweeted, “Coinbase just saw more traffic than we’ve ever encountered.”

Although the ad triggered a burst of traffic and crypto app downloads increased by 279% (which briefly crashed the app), it did little to help COIN shares. In fact, COIN shares opened lower the day after the Super Bowl (February 14, 2022).

The fact of the matter is Coinbase is a big player in the crypto space. In March, Coinbase noted that it has “over $130 billion of quarterly institutional trading volume and over $50 billion of institutional assets on platform.”

And as of the fourth quarter of 2022, “roughly 25% of the largest hedge funds in the world by reported assets under management have chosen to onboard with Coinbase.”

In today’s Market 360, we’ll review why the SEC is going after Coinbase and another major crypto company. I’ll explain why I don’t like cryptocurrency, as well as where I think your hard-earned money could be better spent.

SEC Sues Coinbase… And Another Big Crypto Company

Today, the SEC announced that it is suing Coinbase for allegedly hosting an unregistered exchange and not being registered with the SEC as a broker and clearing agency.

Specifically, SEC Chair Gary Gensler claims:

We allege that Coinbase, despite being subject to the securities laws, commingled and unlawfully offered exchange, broker-dealer, and clearinghouse functions. … In other parts of our securities markets, these functions are separate. 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. Further, as we allege, Coinbase never registered its staking-as-a-service program as required by the securities laws, again depriving investors of critical disclosure and other protections.

Gurbir S. Grewal, Director of the SEC’s Division of Enforcement also claimed that “Coinbase was fully aware of the applicability of the federal securities laws to its business activities, but deliberately refused to follow them.”

COIN shares plunged nearly 20% at the market open on Tuesday.

However, Coinbase wasn’t the only crypto company sued by the SEC this week…

Just 24 hours before it sued Coinbase, the SEC went after Binance, the world’s biggest cryptocurrency exchange. The SEC hit Binance and its founder, Changpeng Zhao, with 13 different charges.

The SEC’s allegations against Binance were similar to those of Coinbase’s. The SEC claimed:

Binance and BAM Trading, under Zhao’s leadership and control, have unlawfully offered three essential securities market functions – exchange, broker-dealer, and clearing agency – on the Binance Platforms without registering with the SEC. Acutely aware that U.S. law requires registration for these functions, Defendants nevertheless chose not to register, so they could evade the critical regulatory oversight designed to protect investors and markets.

The SEC also believes that Binance established Binance.US to “reveal, retard, and resolve built-up enforcement tensions” and “[i]nsulate Binance from legacy and future liabilities.”


The SEC is obviously on the warpath, though I’m not sure its lawsuits will hold up in the courts. The SEC is alleging that both Coinbase and Binance violated the Securities Exchange Act of 1934 and the Securities Act of 1933. The problem is that the laws never envisioned cryptocurrencies.

Now, I’m not a fan of cryptocurrency and never have been.

The fact of the matter is cryptocurrencies evolved for tax evasion in India and Asia. Some places with big underground, cash economies like California (20% of Californians do not have bank accounts), have naturally embraced cryptocurrencies. But cryptocurrency investments as a whole remain very volatile – and crypto traders are getting a big taste of that volatility today.

For example, since yesterday, Bitcoin dropped 5% this morning, only to rebound this afternoon – it’s now up more than 4% in the last 24 hours.

I should also add that I am registered with the SEC, where we are not authorized to make cryptocurrency recommendations. I cannot embrace cryptocurrencies until I know the rules, which are currently in flux.

Avoid the Volatility With Fundamentally Superior Stocks

If you want to limit your risk and still boost your portfolio, then fundamentally superior stocks are your best bet.

If you’re not sure where to look, then consider my Growth Investor stocks. The vast majority of my Buy List companies posted positive earnings growth and provided good guidance. In addition, my stocks are characterized by 180.7% average annual earnings growth, yet only trade at 15.7 times median forecasted 2023 earnings.

So, it’s clear to me that we remain invested in fundamentally superior stocks. And even better – they’re also benefitting from some of the strongest trends right now:

  • The artificial intelligence boom
  • Peak summer crude oil demand and higher energy prices
  • The green revolution push
  • The continuing demand for semiconductors

And several of my Growth Investor stocks also represent great special situation companies that dominate their respective businesses.

The bottom line: If you don’t have the stomach for extreme cryptocurrency volatility, stick with fundamentally superior stocks instead. For my list of the best fundamentally superior stocks, join me at Growth Investor today.

(If you are already a Growth Investor subscriber, you can log in here to view the most recent issue.)


Louis Navellier

Editor, Market 360

P.S. There is a great divide opening up in America – and investing in my Growth Investor stocks will help get you on the right side of it. On one side is a new aristocracy that’s amassing more wealth more quickly than any other group in American history. For people like me, the one percent, life has never been better, more prosperous.

On the other side, the opposite is happening. Wealth is flowing out of the pockets of ordinary Americans at an unprecedented rate.

What’s happening is only going to gather in strength over the coming decades. It certainly won’t weaken.

Few Americans even know that any of this is going on. I’ve never seen anyone from my side of the chasm step forward to explain any of these things.

It’s why I put together this video. In it, I’ll lay out exactly what is happening, including several key steps every American should take right now.