Coinbase has strongly denied the legality of the SEC’s stand.

According to a Bloomberg report, cryptocurrency exchange Coinbase (NASDAQ: COIN) is facing a new Securities and Exchange Commission investigation regarding whether American investors were permitted to trade digital tokens that should have been registered as securities. Therefore, the SEC is reportedly investigating whether the exchange violated securities laws.

In a separate action, the SEC last week accused one of Coinbase’s former employees of insider trading violations in connection with a securities investigation. The employee is alleged to have contacted his brother and a friend to provide them advance notice on upcoming token sales, according to prosecutors.

Though it has not charged the exchange with any wrongdoing, the SEC said it had determined that nine tokens traded by the individuals it implicated in insider trading contained “hallmarks of the definition of a security.”

Seven of those tokens are available for trade at Coinbase on the exchange at this time.

Last year, Gary Gensler, the SEC chairman, also contended that Coinbase could be violating the law by listing “dozens of tokens that might be securities.”

Coinbase said last week in a blog titled “Coinbase does not list securities. End of story,” that it had a rigorous process to analyze and review each digital asset before making it available on the exchange — a process that the SEC itself has reviewed.

“This process includes an analysis of whether the asset could be considered to be a security, and also considers regulatory compliance and information security aspects of the asset,” the crypto exchange wrote.

Coinbase’s chief legal officer Paul Grewal referred in a tweet to the above blog and said: “We look forward to engaging with the SEC on the matter.”

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