According to the recent US Securities and Exchange Commission (SEC) complaint against Bittrex, the securities regulator insists that some crypto-asset tokens were offered and sold as investment contracts and are securities. The news follows the SEC’s designation of several crypto assets as securities, including the case against Terraform Labs, which insists that LUNA and UST were sold as unregistered securities. Additionally, a lawsuit launched by New York Attorney General Letitia James against Kucoin insists that ethereum is also an unregistered security.
Lawsuits Against Crypto Exchanges Bring to the Fore Lack of Clarity on Security vs. State of Commodities
This year, US regulators are designating a number of crypto assets as unregistered securities, and the allegations are buried in lawsuits against several crypto exchanges. Bittrex is the latest cryptocurrency exchange to be sued this year, following lawsuits against trading platforms including Binance US, Kucoin, and Coinex, after the SEC accused Bittrex of operating “a non-public stock exchange, broker, and clearing agency.” registered”. In it lawsuit against Bittrexthe SEC insists that DASHALGO, TKN, NGC, and OMG are unregistered values.
As an example, in page 35, the SEC emphasized that “investors in GMOs had a reasonable expectation of gains based on the efforts of others” while discussing Project Omisego. The securities regulator claims that “materials available at the time of the (initial coin offering (ICO)) indicated that the development of the platform by the OMG Network team could generate profits for OMG token holders.” On page 37, the SEC discusses DASHand the regulator highlights that “buyers of DASH invested in a common enterprise.”
Gary Gensler has been promoting Algorand for years.
Now that the SEC has ruled that Algorand is a security, will it face the same $1.26 million fine it imposed on Kim Kardashian?pic.twitter.com/ucuOOVxqPS
— LilMoonLambo (@LilMoonLambo) April 17, 2023
The SEC explains how the Dash project has a treasury, Dash Control Group, and outlines the Masternode process. Another crypto asset designated as an unregistered security is ALGO, as the regulator claims it was also sold as an investment contract. This particular crypto asset is being discussed on social media because SEC Chairman Gary Gensler, formerly called Algorand is “great technology” and “something you can build Uber on,” and he speak about the Italian computer scientist Silvio Micali, founder of Algorand. However, despite the SEC Chairman’s earlier comment, the SEC’s complaint insists that:
Investors in ALGO had a reasonable expectation of profit based on the efforts of others.
The regulator’s complaint, filed in the US District Court for the Western District of Washington, provides details about when crypto assets were made available on the Bittrex platform. The SEC explains that DASH was available on Bittrex in 2014, but was temporarily removed on December 29, 2020, only to relist on September 1, 2021. “From the time of its offering and continuing for the relevant period, DASH offered and sold as an investment contract and therefore as a security,” the SEC’s complaint adds.
Regulatory Bodies Disagree Over Classification Of Ethereum And Other Cryptocurrencies
The Securities and Exchange Commission has not provided an official list of crypto assets that have been considered securities. Mentions of such designations continue to emerge in court cases, such as the one in July 2022. insider trading case involving a Coinbase employee. The lawsuit referenced crypto assets such as dfx finance (DFX), LCX (LCX), powerledger (POWR), and six other digital currencies listed on the crypto trading platform. Luna (LUNA) and terrausd (UST) were identified as unregistered securities in the SEC’s case against Do Kwon. Additionally, the lawsuits against Kucoin and Coinex brought by New York Attorney General Letitia James make specific designation claims.
In the Coinex lawsuit, James and the Office of the Attorney General (OAG) claim that the trading platform failed to register as a stock and commodity broker and sold “securities and commodities.” Securities and commodities mentioned in the OAG case include AMP, LUNA, LBC and RLY. In the case against Kucoin, James and the Attorney General stated that the second largest crypto asset, ethereum (ETH), is an unrecorded value.
In the US Commodity Futures Trading Commission (CFTC) lawsuit against Binance, the commodity regulator declares bitcoin, ethereum, binance usd, tether, and litecoin to be commodities. The discrepancies between the OAG and CFTC claims highlight the lack of regulatory clarity in the system where two regulatory bodies have not yet decided what is a security and what is a commodity in terms of the thousands of crypto assets that exist today.
What do you think the future holds for cryptocurrency regulation? Do you think more clarity and consistency will emerge, or will the regulatory landscape remain fragmented and uncertain? Share your thoughts in the comments section below.
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