Legal figures engaging with cryptocurrency are warning over continued regulatory uncertainty impacting businesses after US regulators fined EtherDelta almost $400,000 November 8.
EtherDelta Could Set Precedent
EtherDelta, which operated since 2016 as a smart contract on Ethereum, fell victim to securities obligations under the US’ Securities and Exchange Commission (SEC), leaving owner Zachary Coburn liable for penalties totaling $388,000.
This, securities lawyer Jake Chervinsky and Blockchain chief legal officer Marco Santori among others note, comes despite EtherDelta sharing few characteristics of a traditional cryptocurrency exchange.
“Even though EtherDelta was just a smart contract on Ethereum, the SEC said it was legally an ‘exchange’ because it ‘brought together purchasers and sellers of securities,’” Chervinsky notes quoting a filing Coburn uploaded about the dispute.
While the revelation about Coburn’s fine appeared to unsettle users, Chervinsky adds the event should have been expected given the raft of investigations the SEC has hinted are ongoing this year.
In future, he suggests, larger, “wealthier” targets could also come in for penalties, including those which have only tenuous links to the SEC such as overseas-registered entities.
17/ Okay, so what happens next?
More of the same, definitely. But eventually the SEC will run out of easy targets and into tougher issues. For example, one question is whether the SEC can go after exchanges located outside US borders.
They’ll likely try, but will they succeed?
— Jake Chervinsky (@jchervinsky) November 9, 2018
No Way Out Of Obligations
“(Decentralized exchanges are) not a good way to escape securities laws,” Santori meanwhile summarized.
They are very, very broad. Much broader than the money services laws in the US.