SEC Expands Securities Classification in Binance Case
The SEC’s new argument now argues that the term securities refers to all aspects of investments, transactions, and contracts involving crypto tokens.
As reported by Coin68, the SEC was said to want to make adjustments in late July regarding the securities charges against the tokens mentioned in the Binance case. This information at that time excited the crypto community with the hope that the US Securities and Exchange Commission would finally change its stance and be more open to classifying securities.
However, according to newly released court documents, the SEC actually changed its securities argument, from directly referring to crypto tokens to expanding this category to include all purchase, sale, and investor expectations.
The SEC's explanation is said to be taken directly from the Howey Test, according to which a security is determined based on whether the asset satisfies four requirements:
1. It is an investment of money;
2. The investment is made in a common enterprise;
3. There is an expectation of profit from the investment;
4. The profit comes from the efforts of the organization selling the investment or a third party.
The SEC said that it has always maintained this view when referring to crypto securities, but has "shortened" it to only tokens that are considered securities. The Commission announced that from now on it will no longer use this abbreviation to avoid confusion.
Legal experts in the crypto industry have not hidden their surprise, as well as their dissatisfaction, with the new change from the SEC.
Paul Grewal, Chief Legal Officer of Coinbase, an exchange that is also being sued by the SEC for securities trading similar to Binance, pointed out the inconsistency of the Securities and Exchange Commission when in the lawsuit Ripple also stated directly on the first page of the lawsuit that "XRP is a security", without mentioning the "shorthand" argument or referring to the purchase contract, etc.
Ripple recently agreed to end the SEC lawsuit with a court ruling that the company did not violate the law in offering XRP to investors through intermediaries such as exchanges, but only violated when directly selling tokens to large organizations and agreed to pay a fine of $ 125 million for this.
Variant Fund Chief Legal Officer Jake Chervinsky commented that "it is unbelievable that the SEC can be so implicit to this extent".
Tether’s Chief Legal Officer Stuart Alderoty directly criticized the SEC, saying that the commission “must admit that it contradicts itself” and that it is time to admit that instead of trying to cover it up.
The US Securities and Exchange Commission continues to use the securities argument to hold accountable many large companies in the industry, including exchanges Coinbase, Binance, Kraken, Robinhood, Uniswap, infrastructure developer Consensys, NFT platform OpenSea, pressure to block the Solana ETF, fine eToro and Terraform Labs, etc.
On the other hand, the SEC also received some failures such as having to end the securities investigation targeting Ethereum and “turn around” to quickly approve an Ethereum ETF, as well as ending the investigation into Paxos/BUSD and Stacks without further legal action.
