Marisa Tashman, Policy Counsel at the Blockchain Association, says the Coinbase insider trading case will have "huge implications on the industry."
- The SEC claims that crypto assets are securities because they fall under "investment contracts." Let's have a closer look:
- The term "security" includes an "investment contract," according to the SEC.
- When determining if an asset constitutes a security, apply the Howey test, which says:
- An investment contract happens where there is a "reasonable expectation of profit to be derived from the efforts of others."
- Coinbase
lists nine assets considered to be securities: AMP, Rally, DerivaDEX,
XYO, Rari Governance Token, LCX, Powerledger, DFX Finance, and
Kromatika.
- The creators (developers) of these nine tokens were not listed as defendants in the SEC's case.
- However,
the ruling of the Wahi brothers case could be extended to developers
potentially who will be required to register with the SEC.
- Another issue that Coppel highlighted is "people trading, buying, or selling those tokens would also violate securities laws."
- It is essential to note that the SEC has admitted that tokens in the secondary market don't constitute a security.
- Also, if an exchange sells tokens without SEC registration, it requires escaping the "Hinman paradox" to avoid fines.
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