Over the course of this year, several cryptocurrency assets have been designated as unregistered securities by U.S. regulators, with many of the allegations being made in lawsuits against various cryptocurrency exchanges. One such exchange is Bittrex, which was recently sued by the SEC for allegedly operating "an unregistered national securities exchange, broker, and clearing agency." The SEC claims that several crypto assets, including DASH, ALGO, TKN, NGC, and OMG, are unregistered securities.
The SEC's lawsuit against Bittrex cites several examples of how these crypto assets were sold as investment contracts, which are considered securities. For instance, the SEC states that "investors in OMG had a reasonable expectation of profits based on the efforts of others" and that "materials available at the time of the [initial coin offering (ICO)] indicated that the development of the platform by the OMG Network team could lead to profits for OMG token holders." Similarly, the SEC argues that "purchasers of DASH invested in a common enterprise" due to the existence of the Dash Control Group and the Masternodes process.
Another crypto asset that the SEC has deemed an unregistered security is ALGO, which the regulator claims was also sold as an investment contract. This is noteworthy because SEC Chair Gary Gensler has previously praised Algorand as "great technology" and talked about its potential to create platforms like Uber. However, despite Gensler's past comments, the SEC complaint still argues that ALGO is an unregistered security. The SEC's lawsuit against Bittrex provides specific details on when the various crypto assets were made available on the exchange's platform. For instance, DASH was initially made available on Bittrex in 2014 but was temporarily removed in December 2020 before being relisted in September 2021. The SEC argues that DASH was sold as an investment contract throughout this period, making it a security.
Overall, the lawsuits against various cryptocurrency exchanges highlight the lack of clarity surrounding the status of crypto assets as securities or commodities. While some crypto assets may be sold as investment contracts and therefore qualify as securities, others may not meet this definition. As regulators continue to grapple with these issues, it's likely that more crypto assets will be designated as unregistered securities, potentially leading to further lawsuits against cryptocurrency exchanges.
Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.