The US Securities and Exchange Commission’s (SEC) role in the digital assets space continues to spark debate. The agency has been accused of overreaching again in its enforcement actions toward digital assets. This comes in as the SEC moves ahead to amending its complaint in Binance linked lawsuit after the Kraken case decision.
The commission is now backtracking a bit on “crypto asset securities” and acknowledging that 10 tokens aren’t securities on their own. Binance, the biggest crypto exchange by trading volume, has to respond to the matter by October 11. This could set a major precedent for future crypto cases.
SEC’s crypto confusion
Paul Grewal, Chief legal officer of Coinbase, in an X post, revealed the SEC’s shaking stance over the crypto assets. He mentioned that the commission regrets any confusion it may have caused during the case, as it has repeatedly stated that the tokens themselves are securities.
In its amended complaint against Binance, the SEC admitted to confusing by repeatedly labeling crypto assets as securities. However, it admits that the 10 tokens, including Ethereum, can evolve into commodities over time.
Coinbase’s legal head pointed out that the SEC had maintained that the tokens themselves are securities, which is clear from the long record of their regulation by enforcement campaign. He claims that the commission has misled the court.
Stuart Alderoty, Ripple’s Chief legal officer, took the toll of the situation and stated that the SEC finally admits that “crypto asset security” is a made-up term. It also agreed on the fact that to prove a “crypto asset security” is an investment contract, the SEC needs evidence of a bundle of “contracts, expectations, and understandings”.
So the SEC finally admits that 1/ “crypto asset security” is a made up term and 2/ to prove a “crypto asset security” is an investment contract, the SEC needs evidence of a bundle of “contracts, expectations, and understandings”?
Think it’s time for @SECgov to admit it has… https://t.co/iJIYTnNvxs pic.twitter.com/E58Pft7irc
— Stuart Alderoty (@s_alderoty) September 13, 2024
However, the attorney looked confused over the latest fillings and believed that the commission had become a twisted pretzel of contradictions.
Kraken fights back
Kraken is also pushing back against the SEC as it has denied the allegations and is demanding a jury trial. The commission has claimed that the accused crypto exchange was operating as an unregistered securities exchange, among other things.
Back in November 2023, the SEC charged Kraken with running an unregistered platform. The agency listed tokens including Solana (SOL), Cardano (ADA), and Polygon (MATIC) as unregistered securities. Meanwhile, Kraken’s dismissal motion was shot down in August.
The exchange says it tried to cooperate with the SEC but was met with obstacles. They argue that digital assets don’t fit the traditional securities mold and that the SEC hasn’t clarified what transactions are in question.
