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Cryptocurrency Companies Oppose SEC’s Insider Trading Case

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It is reported that an American trade association representing cryptocurrency companies called for the rejection of the insider trading case filed by the Unite…

Cryptocurrency Companies Oppose SEC’s Insider Trading Case

It is reported that an American trade association representing cryptocurrency companies called for the rejection of the insider trading case filed by the United States Securities and Exchange Commission (SEC) on the grounds that the regulator unfairly marked cryptocurrency assets as securities. This case involves a former product manager of Coinbase, a cryptocurrency exchange, and two employees accused of insider trading.  

The Cryptocurrency Trade Organization called for the rejection of the insider trading case filed by the US SEC

Interpretation of the news:


Recently, an American trade association representing cryptocurrency companies raised objections to the insider trading case filed by the United States Securities and Exchange Commission (SEC). The SEC levied charges against a former Coinbase product manager and two other employees on allegations of insider trading. However, the association argues that SEC has unfairly categorized cryptocurrency assets as securities, making the charges baseless.

Securities laws in the United States require companies to register their assets with the SEC to operate legally. The SEC classifies securities as financial instruments that hold some value in a firm or investment. If assets are seen as securities, they fall under the purview of securities law. However, the SEC has not specifically stated whether cryptocurrencies can be classified as securities, leading to ongoing debates in the crypto industry.

For instance, the SEC lawsuit alleges that the Coinbase employees engaged in illegal insider trading, using valuable non-public information to buy and sell cryptocurrencies to make unlawful profits. However, the cryptocurrency companies’ trade association can challenge the SEC’s case, especially if it can prove that it’s improper to classify cryptocurrencies as securities. If the association is successful, the SEC will have to come up with new rules for regulating the crypto industry.

On the one hand, some argue that cryptocurrencies shouldn’t be viewed as securities because they are digital assets and not financial instruments that guarantee a return on investment. Instead, cryptocurrencies are akin to commodities, like gold, which traders can buy or sell based on market demand.

On the other hand, the SEC argues that some cryptocurrencies are securities because they satisfy the Howey Test. The test checks whether an asset is an investment contract, implying that investors expect to earn a profit from the asset with little to no participation in running the enterprise. The SEC states that most cryptocurrencies operate similarly, especially those sold through ICOs, where investors expect to make a profit based on the efforts of the company selling them.

In conclusion, the ongoing saga around whether cryptocurrencies should be classified as securities may soon see a resolution. The cryptocurrency companies’ trade association’s request for the dismissal of the SEC case on the grounds of securities misclassification can have far-reaching implications for the future of cryptocurrency regulation in the United States.

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