‘Shark Tank’ star Kevin O’Leary says legalizing your crypto regulator ‘really stupid’

Venture capitalist and “Shark Tank” star Kevin O’Leary said crypto exchanges should not take legal action against regulators.

“Legalizing your regulator is, in my opinion, a very stupid idea,” he told CoinDesk TV’s “First Mover” on Tuesday, referring to Coinbase ( COIN ), the largest U.S. crypto exchange by trading volume. Coinbase may face regulatory action from the Securities and Exchange Commission (SEC).

O’Leary is a strategic investor in Canadian crypto exchange WonderFi, which plans to merge with two other Canadian exchanges, Coinsquare and CoinSmart.

Last month, the SEC issued a Wells Notice to Coinbase, warning that the agency may pursue legal action against the company for allegedly violating securities laws via its exchange operations and betting services.

In Coinbase’s case, O’Leary said, it would be “better to sit down and figure it out” with regulators, and if a “US regulator doesn’t want stakes or lending, so be it.”

However, San Francisco-based Coinbase said in a blog post last month that the exchange was “confident in the legality of our assets and services.”

O’Leary said Coinbase’s pushback against regulators will ultimately not work in their favor. “You have to read the room,” he said. “You have to read the writing on the wall.”

According to O’Leary, staying in the good graces of regulators should be what other crypto exchanges aim to do.

“If the crypto community and crypto investors like me want to fit into the existing global financial services system, we need to stay under the regulator,” he said. “I no longer have any interest in going to war with regulators, suing regulators and suing regulators. That is not the future of crypto.”

As U.S. regulators target their biggest trading platforms, the future of three Canadian crypto exchanges could soon spur interest in the digital asset industry from U.S. investors

WonderFi, Coinsquare and CoinSmart plan to merge into one entity. They have a combined 1.65 million users and over $600 million in assets under custody, so they will be considered one of the largest regulated crypto trading platforms in the world upon merger.

Canada “can be the guinea pig that works forward with any kind of regulation that works effectively,” O’Leary said.

O’Leary said the partnership is a “necessary merger” and one that can only be done by scaling, in part because of the cost of compliance, which, he said, is expensive.

“We have moved our assets to Canada because we are able to invest there,” O’Leary said. “There are enough tokens under the regulatory environment that we can get full exposure to the volatility of crypto and do it in a way that we can report to our compliance departments and tax authorities in some way.”