The Securities and Exchange Commission (SEC) and the Department of Justice are accusing three people. The SEC’s claims that cryptocurrencies are securities got everyone’s attention and may have more serious repercussions for the cryptocurrency industry.
On Thursday, the US Securities and Exchange Commission designated nine digital tokens as securities against the backdrop of its first insider trading investigation. The SEC is attempting to clarify its regulation of cryptocurrencies through its enforcement actions, so the declaration is important. In a complaint submitted on Thursday, the federal regulator said that a former Coinbase product manager had participated in insider trading by providing his brother and another acquaintance with information about the assets Coinbase would be listing.
According to the complaint, nine of the crypto assets named in the complaint were deemed securities by the SEC.
It is not new for the SEC to classify cryptocurrencies as securities. But it did so through agreements with the issuer or legal procedures. The SEC classified cryptocurrencies as securities for the first time in the lawsuit filed on Thursday without prosecuting the issuers or even having the exchange list the assets. Tokens including AMP, RLY, DDX, XYO, RGT, LCX, POWR, DFX, and KROM were referenced in the complaint.
The Securities and Exchange Commission has so far declined to comment on the situation or if Thursday’s lawsuit set a precedent for how it would classify assets that it considers to be securities. It also failed to say whether it planned to take legal action against Coinbase for listing the disputed assets or whether it intended to file any additional charges against exchanges that did so. In response to inquiries, an SEC representative stated that the insider trading matter was still under investigation.
Caroline Pham, a commissioner for the Commodity Futures Trading Commission (CFTC), tweeted about the complaint and called it a “striking example of regulation by enforcement.” According to Morrison Cohen LLP attorney Jason Gottlieb, Coinbase and other exchanges are not parties to the action. They would therefore be unable to sue the SEC as a result.
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