Lawsuit against KuCoin can make dangerous precedence about Ethereum
2 min readCrypto trading platforms in turn wince at the word “security”. Whether cryptocurrencies qualify as securities under US law is one of the most contentious regulatory issues. Without a conclusive answer, the following applies: in case of doubt for the plaintiff. With KuCoin, another platform for trading in securities must now take responsibility. The accusation calls for the closure of all stores in the state of New York “until the company complies with the law”.
KuCoin: Securities Trading Violations?
According to Attorney General Letitia James, KuCoin is “falsely” posing as a crypto exchange without being “registered with the Securities and Exchange Commission as a national securities exchange, nor designated as such by the Commodity Futures Trading Commission.” According to James, corresponding services such as trading in crypto assets as well as lending and staking offers are therefore offered illegally.
Although KuCoin is not registered in New York, business in the state continues to run smoothly. Likewise in Canada, the Netherlands and Seychelles, where KuCoin is also said to lack licenses. In addition, KuCoin failed to “comply with a subpoena from the OAG and provide further information about its trading activities in digital assets in this state”.
All services would therefore have to be stopped, and KuCoin should initially withdraw from New York by court order. Accordingly, the company must “set up a geoblock based on IP addresses and GPS locations to prevent access to KuCoin’s mobile app, website and services from New York”.
Ethereum rated as security
The Attorney General makes it clear that the cryptocurrencies on offer are securities, i.e. securities. Mentioning Ethereum by name, “This lawsuit is one of the first times a regulator has claimed in court that ETH, one of the largest cryptocurrencies available, is a security.” Ether is “just like LUNA and UST, a speculative asset that relies on the efforts of third-party developers to bring profits to ETH holders.” KuCoin should therefore have been registered before the sale.
However, final assessments are still pending. The US Securities and Exchange Commission recently confirmed its view that Ether should be classified as a security after the Ethereum blockchain switched to Proof of Stake. The Commodity Futures Trading Commission has disagreed.
