Blog Post
Cryptocurrency Regulation Round Up
The regulation of digital currency markets in the U.S. and abroad remains foggy. Today, the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) have been vague regarding how tokens and crypto-based assets map to traditional securities. Clear guidance has not emerged. However, even in the absence of guidance, regulators are bringing forth enforcement actions against companies believed to have engaged in improper cryptocurrency operations.
The space is moving quickly, so clear regulatory parameters could be released at any time. Until then, there are a number of current and potential cases worth watching. These may provide insight into the future of digital asset markets, and their outcomes will offer additional context for companies considering deploying crypto-based projects or programs. Below is a summary of current cryptocurrency regulatory activity in the U.S. to watch in the coming months and year.
CFTC v. My Big Coin Pay
In September, a judge in Massachusetts ruled that virtual currencies are indeed commodities and therefore the CFTC does bear jurisdiction over them. Other aspects of this case are still pending, including ruling on the CFTC’s allegation that the company was engaged in a virtual currency investment fraud. It’s a long way to go until resolution is reached, but this matter could provide groundwork for future actions against virtual currency operators and providers.
CFTC v. Monex
This case holds weight in how it may affect future CFTC enforcement authority over crypto assets and requirements for registrations. It involves a CFTC request for the U.S. Court of Appeals to “overturn a California district court ruling that the regulator can only bring enforcement actions in the cash markets when it alleges both fraud and market manipulation occurred, rather than one or the other.” It does not apply only to cryptocurrency assets, but the outcomes will likely provide judicial guidance on the parameters of “actual delivery” of commodities.
SEC v. Blockvest
This case involves charges of a fraudulent initial coin offering, and SEC efforts to penalize the company for what it believes “constituted an unregistered securities offering with false statements.” The judge on the matter has changed position in preliminaries, ultimately siding with the SEC to move the trial forward. Proceedings are just kicking off and will be important indicators of the extent to which the courts will rule in favor of the SEC in cryptocurrency related enforcement attempts.
SEC v. Kik
While this isn’t officially a case yet, the Canadian startup is preparing for SEC enforcement over a 2017 initial coin offering and whether it was compliant with existing U.S. laws. A notice from the commission late last year indicated intent to take action. The company is taking a firm stance in opposition, with a statement on its website saying the SEC is “about to take a precedent setting vote on the future of crypto innovation in the U.S.”
Tezos Securities Litigation
Another uncertain matter, this litigation is a pending class action securities suit over a $232 million initial coin offering. Class certification has not yet been awarded to plaintiffs. If it moves forward, the ruling on the case has the potential to set precedent for if and how digital tokens qualify as securities.
Related topics:
The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, its management, its subsidiaries, its affiliates, or its other professionals.