Law professors say the outcome of the lawsuit against KuCoin could lead to federal regulatory action against the largest altcoin project. This could have huge implications for the cryptocurrency market.
KuCoin case could be a dangerous precedent for leading altcoin
Penn State University Dickinson Law professor Tonya Evans said the New York Attorney General’s lawsuit against KuCoin could lead to federal review against Ethereum. If Ethereum (ETH) is recognized as a security by a state court, federal regulators could take massive counter action.
On March 9, New York State Attorney General Letitia James sued KuCoin for allegedly violating state securities laws by offering altcoins that meet the definition of securities without registering with the Attorney General’s office. One of the altcoins listed in the lawsuit is Ethereum (ETH), the second largest cryptocurrency by market cap.
Law professor Evans said that if the New York Attorney General wins, designating Ethereum as a security could have huge ramifications for the crypto world. Whether or not one gets accepted may depend on what approach state and federal regulators take when defining cryptocurrencies.
KuCoin is the latest victim of US crypto crackdown
The central exchange has facilitated access to financial products like KuCoin Earn to generate returns for investors, adding to the New York Attorney General’s claim. The attorney general argues that these products and actions are illegal because they are not registered by federal authorities and regulators. The document claims:
KuCoin failed to register with the OAG as a securities broker, trader or commodity broker-trader as required by Section 23-A of the New York General Trading Code (“GBL”), also known as Martin Law. Such conduct is a fraudulent practice under the Martin Act.
Because it operates as a crypto platform and exchange, NYDA believes that KuCoin has “repeatedly engaged in illegal activities” by operating as an unregistered “securities dealer”. The lawsuit aims to ban the crypto exchange from operating in the US and demands a full report on its fees from New Yorkers.
Is Ethereum really a security? How can it affect the news price?
It offers several arguments on Ethereum as a security. First, the launch of ETH through an Initial Coin Offering (ICO), second, its “development and management being driven by a greatly reduced number of people,” including its founder, Vitalik Buterin.
After the ICO, Buterin and the newly created Ethereum Foundation received a “part of the funding” raised at these events. Thus, NYDA claims that Buterin and the Foundation benefit financially from launching ETH.
Arguments accusing ETH of working as a security are based on Buterin and his affiliation with the project and its transition to a Proof-of-Stake (PoS) mechanism. Legal expert Collins Belton believes ETH’s “wartime” is imminent, with potential short-term negative consequences for the project. In the long run, however, he sees Ethereum likely reaching new highs.
