SEC ‘Regrets Any Confusion’ Calling Tokens As Securities: Filing
According to a September 12 court filing, the United States Securities and Exchange Commission has reversed its long-standing practice of describing cryptocurrencies as a “security” and intends to use more cautious language in the future.
The withdrawal was prompted by the SEC's ongoing charges of offering and selling unregistered securities on crypto exchange Binance. In a 2023 complaint, the SEC identified 10 crypto assets on the Binance platform as “securities,” including natives of Solana (SOL), Cardano (ADA), and Polygon (MATIC).
According to a September 12 filing, the SEC regrets any confusion caused by its characterization of these tokens as “crypto asset securities” and “no longer uses the term short-term.”
“By using the term ‘crypto asset securities,' the SEC is not referring to the crypto asset itself as a security,” the agency said. Instead, token status as security includes “full contracts, expectations and understandings focused on sales and distribution. [crypto asset]” refers to the previously written language.
Coinbase's chief legal officer has criticized the SEC. Source: Paul Grewal
Related: Court denies Kraken's motion to dismiss SEC lawsuit
Even under this narrow definition, the SEC said, Binance remains guilty of illegal securities offerings because the exchange's tokens “continue to be offered and sold as investment contracts.”
The securities regulator is pursuing a similar argument against crypto exchange Kraken, which the agency accused of “operating” in November. [a] crypto trading platform as an unregistered securities exchange, broker, dealer and clearing agency.
The regulator's emphasis on the context in which virtual assets are traded follows the 2024 approval of a Bitcoin (BTC) and Ether (ETH) exchange-traded fund (ETF) that uses a legal entity structure to deal with the holding of funds, not commodities.
The SEC also accused Kraken of violating securities laws. Source: Kraken
“I'll say it again: somehow ETH trading[s] They have changed [in] Ten ways to make sense of Crypto assets [referenced in the SEC’s Binance lawsuit] We don't have it to avoid agency congestion,” said Paul Grewal, Coinbase's chief legal officer, in a September 13 post on the X forum.
“How? That's the point.” [SEC] To find out, the rest of us just want to know if and when charges will be filed,” Grewal said. Coinbase has also been accused by the SEC of violating securities laws.
Pressure is mounting on US financial regulators, including the SEC and the Commodity Futures Trading Commission (CFTC), which critics describe as a high-handed and confusing approach to crypto enforcement.
In a statement on September 4, Summer Mersinger, one of the CFTC's five commissioners, chastised the CFTC to engage in “good enforcement” and called for clearer guidance for crypto exchanges.
“He [is] I hope that one day the commission will consider issuing a rule or at least a guideline clarifying how to comply with DFI protocols,” Mersinger said.
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