The Securities and Exchange Commission’s recent fine and censure of digital token platform EtherDelta for failing to register as a national securities exchange is setting the Commission up for legal challenges.
Why? Cipperman Compliance Services says that the SEC’s Nov. 8 ruling regarding EtherDelta is fodder for “a well-funded party” to ultimately challenge the SEC “in the courts about whether digital tokens are securities subject to SEC supervision.”
However, until a court decides otherwise, “those that trade in digital tokens and those that facilitate trading must register as broker-dealers or as exchanges.”
In the case against EtherDelta, the SEC argued that under SEC v. Howey, “the tokens traded included securities because the purchasers of tokens ‘invested money with a reasonable expectation of profits, including through the increased value of their investments in secondary trading, based on the managerial efforts of other,’” Cipperman said.