The Securities and Exchange Commission (SEC) appears to be compiling legal ammunition to take on the beating heart of the global crypto economy: centralized crypto exchanges. And the agency’s unfolding case against FTX reveals arguments that could further that strategy.
In addition to revealing that Ellison and Wang flipped on Bankman-Fried and are now fully cooperating with federal authorities, the complaint divulged that the SEC—in its pursuit of securities fraud charges pertaining to FTX’s sale of its native token FTT—appears to be escalating its assault on crypto assets as a whole.
If the SEC can get courts to agree that crypto tokens like FTT are securities regardless of how they are offered, the agency would be able to go after more than just the projects that create those tokens.
The SEC could target any intermediary that sells those tokens in any context. In such a scenario, major crypto exchanges like Coinbase, Kraken, and Binance would be exposed to immense legal liability, and either permitted to participate in crypto-wary registered exchanges like the New York Stock Exchange, or shut down.
(Reporting by Shikha Singh, Editing by Kapil Rajaygopal)
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