The U.S. Securities and Exchange Commission (SEC) is encouraging investors to exercise caution when dealing with crypto asset securities.

The SEC's Office of Investors Education and Advocacy warned that platforms facilitating crypto trading might not be adhering to federal securities regulations.

In a Thursday bulletin, the SEC stated, "The law requires parties such as securities broker-dealers, investment advisers, and exchanges to register with the SEC, a state regulator, and/or a self-regulatory organization."

Furthermore, the bulletin emphasized that "entities and platforms involved in lending or staking crypto assets may be subject to federal securities laws."

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The SEC has made previous efforts to establish that numerous crypto exchanges are functioning as unregistered securities exchanges in the U.S., a perspective frequently expressed by SEC Chair Gary Gensler.

In the wake of this news, Coinbase's Nasdaq-listed shares experienced a substantial drop, declining by as much as 20% during early trading on Thursday.

At the time of writing, the shares are trading down 14.9% at $65.58.

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