CFTC Commissioner Pham says KuCoin complaint ‘undermines’ SEC 

The CFTC’s complaint classifies KuCoin’s “leveraged tokens” as digital asset commodity derivatives

article-image

Ascannio/Shutterstock modified by Blockworks

share

Days after the Commodity Futures Trading Commission announced its civil lawsuit against crypto exchange KuCoin, one Commissioner is questioning whether the agency is overstepping. 

Commissioner Caroline Pham in a statement Friday criticized the “aggressive enforcement action,” saying the complaint misinterprets what can be classified as “leveraged trading” and is therefore under the CFTC’s purview. 

The complaint, filed Tuesday, classifies KuCoin’s “leveraged tokens,” which represent “shares” in funds controlled by the exchange, according to KuCoin, as digital asset commodity derivatives. 

Read more: CFTC calls ETH a commodity in KuCoin complaint

The CFTC alleges KuCoin violated the Commodity Exchange Act by offering these products, among others, without registration. 

“This interpretation fails to distinguish between an investment in a fund, which would typically be a security under the jurisdiction of the [Securities and Exhcnage Commission], and the trading activities of a fund, alleged here to be under the CFTC’s jurisdiction,” Pham wrote

If the leveraged tokens are securities, as Pham suggests, regulation of the products would fall under the SEC’s jurisdiction. The CFTC complaint undercuts securities regulators’ ability to oversee markets, Pham said. 

Read more: Crypto, it’s time to demand clarity from the courts

“The CFTC’s approach may infringe upon the SEC’s authority and undermine decades of robust investor protection laws by conflating a financial instrument with a financial activity, disrupting the foundations of securities markets,” Pham wrote. “Owning shares is not the same thing as trading derivatives.”

While the SEC has set its sights on other crypto exchanges, including Binance and Coinbase, it has yet to file an enforcement action against KuCoin, at least publicly. 

KuCoin last December settled charges from New York Attorney General Letitia James’ office for $22 million for allegedly operating an unregistered exchange. That case notably referred to ether as a security, whereas the CFTC, in this latest complaint, lists ether and other cryptocurrencies as commodities.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Permissionless is a conference for founders, application developers, and users. Come meet the next generation of people building and using crypto.

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

4.png

Research

This months PPGC covered four main areas. Firstly, debriefing the progress and status of the mainnet implementation of the Ahmedabad hard fork. Secondly, a retrospective on the testnet phase of the Ahemdabad Hard Fork. Thirdly, an update on PIP-36 which involves replaying failed state syncs. Lastly, PIP-47 which pushes upgrades to the Polygon Protocol Council.

article-image

Institutions to test out the settlement of “digital assets and currencies” on a network that annually carries more than 5 billion financial messages

article-image

After Bitwise’s XRP ETF filing this week, one industry watcher notes: “Politics will determine whether this happens soon or in a few years”

article-image

Plus, a look back at some of the SEC’s biggest enforcement moves under Gurbir Grewal

article-image

The forward-looking financial system is being championed by several contributors to India’s UPI digital money system

article-image

Multiple teams are pursuing integration cross-chain and off-chain

article-image

An SEC spokesperson told Blockworks the Ripple judgment clashes with Supreme Court precedent and securities laws