On March 9, New York State Attorney General (NYAG) Letitia James sued cryptocurrency exchange Kucoin for violating securities laws. She said she offers tokens (including Ethereum) that are unregistered and meet the definition of a security.
It is the first time a regulator has legally claimed that Ethereum is a security. U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler has indicated that the SEC may consider Ethereum a security, but the U.S. Commodity Futures Trading Commission (CFTC) has long considered Bitcoin (BTC) as Ethereum. also claims to be a commodity asset.
Attorney General James said that Ethereum is considered a security under the Martin Act, a 102-year-old New York state anti-fraud law, because the value of Ethereum is held by others, including co-founder Vitalik Buterin. He argues that it depends on the efforts. He also said that Luna (LUNA) and Terra USD (UST), which are traded on KuCoin, are also securities.
Ethereum Price Drops 8% After Lawsuit Report. The crypto-asset market has similarly fallen.
“The court complaint alleges that ETH, like LUNA and UST, is a speculative asset that relies on the efforts of third-party developers to provide benefits to ETH holders. Registration required before selling ETH, LUNA and UST” (NYAG office release)
As of this writing, Kucoin has not responded to the NYAG office’s subpoena.
Also staking products
Attorney General James also alleges that KuCoin sells unregistered securities through its lending and staking product, KuCoin Earn.
The NYAG office is not the first regulatory complaint against Kucoin. In 2022, South Korean regulators said Kucoin was conducting “illegal business activities” without proper registration. The Dutch Central Bank also warned in December that the exchange was operating without a license.
In the lawsuit, Attorney General James is seeking a court order to stop Kucoin from operating in the state.
I’m suing cryptocurrency platform @kucoincom for illegally operating in New York without registering with the state.
This is our eighth action to rein in shadowy cryptocurrency platforms that disregard our laws and put New Yorkers at risk.
—NY AG James (@NewYorkStateAG) March 9, 2023
｜Translation: coindesk JAPAN
｜Editing: Takayuki Masuda
｜Original: New York Attorney General Alleges Ether Is a Security in KuCoin Lawsuit