Key Points:
First, let’s review the list of 19 tokens mentioned by the SEC in two lawsuits against Binance and Coinbase, even though the securities definition is “unilateral”:
In the SEC lawsuit against Binance:
In the SEC lawsuit against Coinbase:
And the tokens are listed on both exchanges:
Looking through the 19 tokens in common, the first thing we can see is these tokens had an initial coin offering (ICO) or fundraising activity. An initial coin offering (ICO) is the cryptocurrency industry’s equivalent of an initial public offering (IPO). An ICO may be launched by a firm looking to generate funding to build a new currency, app, or service.
Why, therefore, did the US Securities and Exchange Commission classify these tokens as securities? The Howey Test is applicable here. The subtest includes 4 criteria for judging whether something is a contract for investment.
The SEC claims that the qualities of the 19 tokens submitted this time meet at least three of four criteria, allowing for revenue expectation and meeting the sub-test requirements.
The second issue is what effect it would have if these 19 tokens were classified as securities.
Moreover, some argue that the SEC’s enforcement actions are dangerous. In comparison to the UAE’s, UK’s, and Australia’s varied and more deliberate approaches, the SEC has been chastised for failing to account for sector distinctions and for lacking foresight.
DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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Harold
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