70% of crypto communications potentially misleading, FINRA analysis finds

A majority of FINRA member firms currently at odds with rule prohibiting “false, exaggerated, promissory, unwarranted or misleading” claims

article-image

Andriy Blokhin/Shutterstock modified by Blockworks

share

A Financial Industry Regulatory Authority (FINRA) review of firms’ crypto communications found that roughly 70% potentially violate a specific investor protection guideline.

The analysis, launched in November 2022, focused on how firms are complying with FINRA Rule 2210 — a regulation that “prohibits claims that are false, exaggerated, promissory, unwarranted or misleading.” 

The rule also forbids the omission of facts that could mislead investors. 

“Potential substantive violations” of the regulation existed in about 70% of the 500 analyzed crypto-related communications to retail investors from FINRA member firms, the regulator said Tuesday. 

Such violations included companies’ failure to differentiate between crypto assets offered through the firm and those provided through an affiliate or third party, the FINRA analysis found. Such communications also comprised false statements or implications that crypto assets functioned like cash. 

Read more: Crypto can’t afford another communication crisis

“This update does not create new legal or regulatory requirements or new interpretations of existing requirements, nor does it relieve firms of any existing obligations under federal securities laws and regulations,” FINRA wrote on its website. “Rather, this update poses questions for firms to consider as they review and supervise their retail communications concerning crypto assets.”

FINRA’s Membership Application Program (MAP) follows the US Securities and Exchange Commission’s guidance in assessing a firm’s proposed crypto asset securities business line under applicable rules.

FINRA has sent out crypto-related warnings and considerations before. 

The regulator — with the SEC and the North American Securities Administrators Association — previously pointed out risks associated with self-directed Individual Retirement Accounts, which it notes may invest in crypto assets. 

“Crypto assets may be securities that are offered without SEC registration or a valid exemption from registration, and may not be accompanied by complete or accurate information to aid investors in making informed decisions,” the regulators said at the time.  

Read more: SEC, FINRA double down on warning of retirement account crypto risk

FINRA more recently included crypto asset developments in its 2024 regulatory insight report. The regulator’s membership application program follows the SEC’s guidance in assessing a firm’s proposed crypto asset securities.  

Crackdowns around the way crypto firms communicate to investors goes beyond the US, with the United Kingdom’s Financial Conduct Authority (FCA) recently beefing up efforts to make sure crypto firms marketing to UK customers are complying with certain regulations.


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

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

Flashnote Template Presentation (2).jpg

Research

With the recent election, it’s clear that there will be a meaningful shift in crypto regulations and legislation. Trump is likely as pro-crypto as a president can be. He launched (multiple) of his own NFT collections and is launching an Aave wrapper called World Liberty Fi. He has also spoken out and mentioned that he wants to make the United States "the crypto capital of the planet" and transform it into the "Bitcoin superpower of the world". He proposed creating a strategic national Bitcoin stockpile alongside support from Senator Cynthia Lummis, promising to retain 100% of all Bitcoin held by the U.S. government. More importantly, we’re likely to see deregulation across the board in a lot of industries, with crypto being one of them - as Trump has committed to keeping the crypto market largely unregulated. Crypto, DeFi in particular, has historically been knee-capped by overreaching and hostile governmental agencies and regulation by enforcement, as evidenced by the plethora of Wells notices and lawsuits over the past few years. With Donald Trump winning the presidency, Republicans taking control of the Senate, and being on the verge of securing the House, we think it’s likely that crypto realizes positive regulatory clarity. Below, you can find our analysts’ takes:

article-image

Co-chairing Trump’s transition team to help fill administration positions is Cantor Fitzgerald CEO Howard Lutnick

article-image

Reflect is a delta-neutral currency protocol that lets tokens accrue yield without touching the banking system

article-image

Researcher Justin Drake’s Beam Chain proposal aims to transform Ethereum’s consensus layer with zk proofs and post-quantum cryptography

article-image

Gunzilla’s Theodore Agranat said that blockchain technology helps “enhance’ gamer experience

article-image

BTC continues to smash expectations as it holds near $90,000

article-image

Inflation is higher than it was in 2016, and the Fed is just at the beginning of its rate-cutting cycle