The share price of Coinbase (NASDAQ: COIN) fell by 14%, the largest since July 2022 when the exchange was under investigation by the US SEC for listing cryptocurrencies. After the Kraken exchange agreed to pay $30 million for issuing unregistered securities, yesterday’s decline occurred.

On Thursday, the stock dropped 9.81 (14.13%) from the $68.51 starting price to settle at $59.63. At the time of publication, COIN had decreased by a further 0.95 (1.59%) during pre-market trading.

US SEC goes after crypto staking

The SEC was looking into Coinbase because some of its cryptocurrency listings were allegedly unregistered securities. A US judge dismissed the complaint filed in 2021 accusing Coinbase Global Inc. of selling unregistered securities at the beginning of this year.

After being under investigation for months for providing unregistered securities as crypto staking services, Kraken yesterday signed a settlement agreement with the US SEC. As part of the agreement, Kraken must stop offering cryptocurrency staking services and pay $30 million in civil penalties and disgorgement.

The announcement was made just moments after Coinbase CEO Brian Armstrong tweeted that he had heard rumors that the US SEC intended to ban crypto staking for US retail users.

Coinbase trouble should the rumours be true

There are concerns that Coinbase, a US-based cryptocurrency exchange with the second-largest deposit of Ether (ETH), would suffer significantly if the SEC went ahead with its decision to outlaw crypto staking. The largest ETH deposits are made to the liquid staking system Lido, with Kraken, Coinbase, and Binance rounding out the top five.

About 11% of Coinbase’s net revenue in Q3 2022 came from staking, an 8.5% rise from the prior quarter. The already struggling exchange, which recently reported reducing operation expenses owing to market circumstances, may be troubled by the SEC’s moves.