U.S. court decides against former Coinbase employee, calls some crypto assets securities
A federal judge in a landmark ruling supports the Securities and Exchange Commission’s (SEC) position that certain crypto assets are securities even when traded on secondary markets.
A March 1 judgment in the SEC case against a former Coinbase staffer for insider trading has added another dimension to the ongoing debate about how to categorize crypto assets.
The SEC’s case introduced a unique complexity to the already gloomy crypto regulatory landscape in the U.S., as it involves individuals accused of insider trading rather than crypto firms themselves.
Ishan Wahi, a former Coinbase employee, was found to have shared confidential information with his brother Nikhil Wahi and friend Sameer Ramani, who remains at large.
The SEC argues that the defendants traded unregistered securities on Coinbase, specifically little-known tokens like AMP and DDX.
Wahi and his brother previously settled with the SEC and the Department Of Justice (DOJ), avoiding the risk of a judge ruling on the security status of the tokens.
However, Ramani’s unavailability has given the lawsuit a new twist, leading to a default judgment by Judge Tana Lin of the United States District Court for the Western District of Washington.
The ruling declared every crypto asset Ramani traded on Coinbase as an investment contract, even in secondary transactions.
The “Howey Test” used by the SEC dates back to a 1946 case before the Supreme Court that dealt with selling plots in citrus groves. This test provides four factors under which a financial instrument can be considered as a security.
It remains prevalent in determining whether virtual money is actually securities or not.
Though Bitcoin has enjoyed regulatory clarity since being labelled as a commodity in 2015, other cryptocurrencies remain undefined, posing real regulatory and legal threats to centralized exchanges. #Write2Earn