As cryptocurrencies rise in popularity, the Securities and Exchange Commission (SEC) faces a new battle to determine its reach and jurisdiction over the new asset class. In its latest confrontation with the crypto market, the SEC will be evaluating whether Coinbase (NASDAQ: COIN) listed cryptocurrencies that technically met the criteria of being a security. If so, it would mean Coinbase could face fines and possibly even a hit to its business model. 

Based on reports, there are two facets to the investigation. First comes the insider trading allegations. In an SEC filing, the complaint stated that a former Coinbase manager conducted insider trading by tipping off family and friends about new tokens planned to be listed by Coinbase in the near future. The recent announcement made by authorities claims that the group of traders made roughly $1.5 million in gains from trading 25 different cryptocurrencies. Two of the three of the individuals in the scheme have already been arrested.

The second part of this issue is that the SEC alleges that the nine of the cryptocurrencies that were a part of the insider trading met the criteria of being a security. In the formal complaint, the SEC went through the nine cryptocurrencies one by one and described how it believed the assets passed the Howey Test.

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Source Fool.com