New York AG Alleges ETH is a Security in KuCoin Lawsuit

Letitia James argues that KuCoin should have registered to allow ETH trading

article-image

Allegation by NYAG on security status of Ethereum token ETH

share

New York Attorney General Letitia James became the first regulator in the US to claim in court that ethereum is a security in a lawsuit against exchange KuCoin. 

Seychelles-based KuCoin has been operating in New York without registering as a securities and commodities broker-dealer, James alleged in the suit

KuCoin facilitates trading of ETH, James added, “a speculative asset that relies on the efforts of third-party developers in order to provide profit to the holders of ETH.” The exchange should have registered before offering ETH, LUNA and TerraUSD — all of which fall under the securities classification, according to James.

However, the NYAG may not have the final say on the issue. Rostin Behnam of the CFTC told the Senate Agriculture Committee as recently as Wednesday that ETH is in fact a commodity, not a security.

“We would not have allowed the Ether futures product to be listed on a CFTC exchange if we did not feel strongly that it was a commodity asset,” he explained.

SEC leaders have made similar statements. In 2018, William Hinman, the then-Director of Corporate Finance at the SEC, said in a speech that both bitcoin and ETH are not securities. His justification was that bitcoin is “decentralized” and ETH, despite its 2014 initial coin offering, had become “sufficiently decentralized” over the past four years to make it a non-security. 

The Office of the State Attorney General (OAG) confirmed KuCoin’s alleged unlawful actions because OAG Detective Brian Metz has been transacting on the exchange from New York since May 2022, the lawsuit states. 

KuCoin’s lending and staking product, KuCoin Earn, is also an unregistered security offering, the lawsuit alleges. 

The OAG served KuCoin a subpoena on Jan. 10, 2023 but respondents did not reply and failed to appear to testify on the date specified in the subpoena, the lawsuit claims. 

The lawsuit is similar to a suit brought against exchange CoinEx in February alleging the exchange offered trading services for tokens including AMP, LUNA and LBC, all of which the Attorney General’s office says are securities. 

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

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Unlocked by Template.png

Research

With the spot ETH ETF approval, the institutions are coming. stETH - given its dominance in marketshare, existing liquid market structures, and highly desirable properties - is poised for institutions.

article-image

Trump insiders say he will dismantle the anti-crypto army within an hour of taking office, but the campaign has been quiet about how it plans to do so

article-image

Plus, Solana set a record for weekly unique active addresses on the network last week

article-image

Launching cryptocurrencies the old fashioned way may soon make a return

article-image

Kraken and CertiK brought their beef to social media after Kraken said researchers exploited $3 million through a bug

article-image

NVIDIA’s historic run is only deepening the divide between mega-cap tech stocks and the rest of the market.