The United States Securities and Exchange Commission (SEC) has labeled three cryptocurrencies, DASH, ALGO, and OMG, as “unregistered securities,” and hence, unsafe, in a recent case brought against Bittrex, a well-known cryptocurrency exchange. The lawsuit claims Bittrex broke federal securities regulations by enabling clients to trade these tokens on its platform without registering them as securities.
The organization has taken action against other blockchain-based projects that it believed were undertaking unregistered securities offerings, including Telegram and Kik.
The lawsuit claims that Bittrex did not need clients to register or request an exemption from registration requirements to trade DASH, ALGO, and OMG on its platform. The SEC asserts that because these tokens were sold to investors with the expectation of profiting from the labor of others, they satisfy the legal definition of securities.
It was disclosed that the Securities and Exchange Commission (SEC) has long held that digital assets that fall under the legal definition of securities must be registered with the SEC or excluded from registration requirements. Also, the organization has provided guidelines to assist cryptocurrency businesses in determining if their tokens are securities.
SEC Takes Action, Moves To Enforce The Law
The SEC’s efforts to enforce securities rules in the cryptocurrency business are ongoing, as seen by the case it recently filed against Bittrex. The government has made it clear that it would not hold back in taking legal action against businesses that break these regulations, regardless of whether they are engaged in the established banking industry or an emerging cryptocurrency industry.
Bittrex released a statement in reaction to the complaint stating that it is “committed to complying with all applicable laws and regulations.” The company also said it had taken major steps to ensure its platform complies with government requirements.
The SEC’s action against Bittrex will probably have broader ramifications for the entire Bitcoin market. It might result in a closer examination of other cryptocurrency initiatives and exchanges and more knowledge of the legal standing of different tokens.
Experts who commented on this development clarified that because DASH, ALGO, and OMG are listed by the SEC as unregistered securities does not imply that they are fraudulent or against the law. Instead, it only denotes that they must be correctly registered with the agency under the applicable securities rules.
The SEC has previously declared that the two biggest cryptocurrencies by market capitalization, bitcoin, and Ethereum, are not securities. Other cryptocurrencies, including Litecoin, tether, and Binance USD, have also been classified by the agency as commodities rather than securities.
On the other hand, many other cryptocurrencies’ legal standing is still up for debate. The SEC’s actions in cases like the one against Bittrex will further guide how these tokens will be regulated.
A larger trend of rising regulatory scrutiny of the cryptocurrency business includes the SEC’s case against Bittrex. In addition to the SEC, other organizations have initiated legal action against cryptocurrency businesses breaking federal rules.
The Commodity Futures Trading Commission (CFTC) ruled that Litecoin, Bitcoin, Ethereum, Binance USD, and one of the biggest cryptocurrency exchanges in the world, Binance, are all commodities in a case against the company. By allowing American consumers to trade derivative items without registering with the organization, the agency said that Binance had broken the laws governing commodities futures trading.
From the information gathered about the Coinex court case, the office of James and the OAG claims that the cryptocurrency exchange platform failed to register their commodities and securities. According to sources, names of those commodities and securities indicted in the attorney general’s office include RLY, AMP, LBC, and LUNA.
As for the Kucoin lawsuit, reports have it that James and the OAG have issued a statement, accusing Ethereum of being unregistered security. From investigations, this is not the first time the such trend has been witnessed in the cryptocurrency industry. A major example is the court case between the United States Commodity Futures Trading Commission (CFTC) and Binance. In that case, unlike what we have today, the commission claimed that the Binance USD, Ethereum, and other listed coins are commodities.