Coinbase says it could get sued by the SEC, which has identified 'potential violations of securities law' at the exchange

• Coinbase said it got a Wells notice from the SEC alerting it of possible enforcement action.
• The regulator told the crypto exchange it had identified potential violations of securities law, but little more.

Coinbase, the largest cryptocurrency trading platform in the US, could get sued by the Securities and Exchange Commission over its crypto offerings.

Coinbase said Wednesday that it got a Wells notice from the SEC alerting it of potential enforcement action for possible violations of securities law after "a cursory investigation," but that the SEC didn't expand much more.

The exchange said the notice from the SEC touched on unspecified portions of its listed digital assets, its staking service, its self-custody crypto wallet and an aspect of its exchange called Coinbase Prime.

"We are prepared for this disappointing development," Paul Grewal, chief legal officer, said in a Wednesday statement.

"We are confident in the legality of our assets and services, and if needed, we welcome a legal process to provide the clarity we have been advocating for and to demonstrate that the SEC simply has not been fair or reasonable when it comes to its engagement on digital assets," he added.

While the notice isn't an official charge or lawsuit, it can lead to one, Coinbase said. The SEC's crypto crackdown escalated in the aftermath of FX's collapse last November, hasting the urgency to rein in potentially risky offerings.

Cathie Wood's Ark Invest sold $13.5 million worth of Coinbase stock on Tuesday. The famed money manager now holds a 7% stake in the crypto exchange worth $837 million. Shares of Coinbase plunged nearly 11% in premarket trading on Thursday.

The SEC declined to respond to Insider's request for comment.