SEC listing 9 tokens as securities in insider trading case ‘could have broad implications’ — CFTC

SEC listing 9 tokens as securities in insider trading case 'could have broad implications' — CFTC

Caroline Pham is one of five United States Commodity Futures Trading Commission (or CFTC) commissioners. She expressed concern about the potential implications of a case brought by the Securities and Exchange Commission (or SEC) against a former product manager from Coinbase.

Pham stated Thursday that the SEC case against Ishan Wahi (ex-Coinbase product manager), his brother Nikhil Wahi, and Sameer Ramani (“could have wide implications”) could go beyond the case due to the fact that nine tokens were classified as “crypto assets securities” by the regulatory body. According to the complaint, Ramani and Wahis were accused of insider trading using confidential information Ishan obtained at Coinbase to determine which tokens would be available on the exchange for purchase in advance.

The SEC specifically referred to Powerledger, Kromatika, DFX Finance, DFX, Amp (AMP), Rally, Rally Token (RGT), Rari Governance Token(RGT), DerivaDAO, DDX, LCX and XYO as securities. This is 9 out of 25 cryptocurrencies that the trio allegedly used in order to gain $1.1 million in gains. Pham stated that the SEC’s actions were an example of “regulation and enforcement” rather than dealing with the issue of crypto assets as securities.

Pham stated that regulatory clarity is achieved by being open and transparent, not hiding. The CFTC should make every effort to comply with its statutory mandate and enforce the law vigorously, as well as the open questions about the legal status of different digital assets such utility tokens and DAO-related tokens.

Read my statement on #SEC v. Wahi, regulation by enforcement & #CFTC authority #crypto #digitalassets #DAO pic.twitter.com/xbHvyshx8l
Caroline D. Pham (@CarolineDPham), July 21, 2022

A Thursday update to a April blog post by Coinbase hinted at similar concerns. It called the SEC’s charges an “unfortunate distracting event” and also filed an indictment. However, the U.S. Attorney’s Office of the Southern District of New York did not indict any of the tokens in question — including Tribe, Alchemix, Gala, Ethereum Name Service, ENS, POWR, or XYO — as securities.

According to the company, “The DOJ has not charged securities fraud.” “No securities are listed on our platform.”

Gurbir Grewal, SEC Enforcement Director, stated that the case against Ramani and Wahis was based on “economic realities of offering,” claiming some crypto assets were securities. Permanent injunctive relief, disgorgement, and civil penalties were sought by the regulator.

Related: CFTC declares 34 forex and crypto firms foreign unregistered entities

SEC and CFTC often claim overlapping jurisdictions in the United States when it comes down to regulating digital assets. They label them either as commodities or securities based upon their respective agencies. Senators Cynthia Lummis (Senator) and Kirsten Gillibrand (Senator) introduced a bill in June that would provide regulatory clarity in the space. It would give the CFTC “clear power over applicable digital asset spot market markets” according to Lummis, however, Lummis stated that it was more likely that the legislation will be delayed until next year.

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