SEC Clarifies What It Means for Crypto Assets to Be Securities
The U.S. Securities and Exchange Commission (SEC) has clarified the term “crypto assets as securities.” The agency is attempting to resolve confusion surrounding its use in ongoing litigation against Binance.
The SEC issued an amended complaint highlighting that it does not consider crypto assets themselves to be a security. Rather, the term refers to the contracts, expectations, and understandings surrounding the sale and promotion of these assets.
What Does Crypto Assets Mean? Here’s What the SEC Says
This clarification comes from the SEC’s use of the term in previous cases, notably in Footnote 6 of its amended complaint against Binance. The SEC stated that while the term was useful as a shorthand, it could have inadvertently created misunderstandings.
Referring to its previous case, the Commission emphasized that the securities in question are not the crypto assets themselves, but rather the investment contracts tied to their sale and distribution.
“To avoid any confusion, the PAC is no longer using the abbreviated term, and the SEC regrets any confusion it may have invited in this regard,” the court document reads.
Ripple’s Chief Legal Officer Stuart Alderoty reacted critically to the SEC’s clarification, commenting on the agency’s inconsistent stance.
“So the SEC finally admits that 1/ ‘crypto-asset as a security’ is a made-up term and 2/ to prove that a ‘crypto-asset as a security’ is an investment contract, the SEC needs evidence of a set of ‘contracts, expectations, and understandings,’” Alderoty noted.
Read more: What is the Howey Test and how does it affect the cryptocurrency market?
The debate continues as critics argue that the SEC’s stance has fostered legal uncertainty. John E. Deaton, a candidate for the US Senate from Massachusetts, added that “The SEC loves the law to be vague,” reflecting frustration.