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The crypto market in shock: A court decision classifies some cryptos as securities!

Thu 07 Mar 2024 ▪ 3 min of reading ▪ by Luc Jose A.
▪ Trading

The legal battle over the classification of cryptocurrencies as securities is making headlines once again. A U.S. judge has just ruled that certain crypto transactions on the secondary market constitute securities transactions. The significance and implications of this decision are being discussed among crypto industry stakeholders.

Le marché crypto bouleversé par une décision de justice qui classe certaines cryptos parmi les titres

A Win for the SEC Against Cryptos?

Western District of Washington judge Tana Lin has ruled on whether cryptocurrencies are securities, in the context of the Wahi trial. This insider trading case involves Ishan Wahi, a former Coinbase manager, his brother Nikhil Wahi, and their associate Sameer Ramani.

According to her opinion, the trading of certain cryptocurrencies on secondary markets amounted to securities transactions. This is a decision that sides with the Securities and Exchange Commission (SEC).

For John Reed Stark, a former SEC official, Judge Tana Lin’s decision is particularly significant. Especially since her ruling establishes that specific crypto transactions on exchanges like Coinbase are equivalent to securities transactions.

The case, dubbed the “first-ever crypto insider trading case” by the U.S. Department of Justice (DOJ), has highlighted the involvement of certain cryptos. These are AMP, RLY, DDX, XYO, RGT, LCX, POWR, DFX, and KROM.  

A U.S. judge has recently ruled that certain crypto transactions are securities transactions

Implications of a Decision That Causes Concern

It’s important to understand that when crypto exchanges on the secondary market are considered securities transactions, this carries a significant meaning. The decision indicates that these transactions are regulated in the same manner as traditional securities transactions.

In other words, financial regulators such as the SEC may deem the concerned cryptocurrencies to be financial securities rather than simple digital assets. As a result, trading these cryptos on secondary trading platforms is subject to financial market regulations.

Expressing his concerns, John Reed Stark suggested that Judge Lin’s decision could set a precedent for future rulings, which would have an impact on both Coinbase and the entire crypto ecosystem.

This view is moderated by Paul Grewal, the Chief Legal Officer at Coinbase. He believes the significance of this court decision should be downplayed as it was a default judgement with the defendants not contesting the charges. Regardless, the SEC intends to leverage it to push for stringent regulation of the industry. 

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Luc Jose A. avatar
Luc Jose A.

Diplômé de Sciences Po Toulouse et titulaire d'une certification consultant blockchain délivrée par Alyra, j'ai rejoint l'aventure Cointribune en 2019. Convaincu du potentiel de la blockchain pour transformer de nombreux secteurs de l'économie, j'ai pris l'engagement de sensibiliser et d'informer le grand public sur cet écosystème en constante évolution. Mon objectif est de permettre à chacun de mieux comprendre la blockchain et de saisir les opportunités qu'elle offre. Je m'efforce chaque jour de fournir une analyse objective de l'actualité, de décrypter les tendances du marché, de relayer les dernières innovations technologiques et de mettre en perspective les enjeux économiques et sociétaux de cette révolution en marche.

DISCLAIMER

The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.