New York Attorney General Files Lawsuit Against Kucoin and Declares Ethereum a Security
On March 9, 2023, New York attorney general Letitia James announced that her office had once again cracked down on crypto platforms by filing a lawsuit against the Seychelles-based crypto exchange Kucoin. Members of the Office of the Attorney General (OAG) were able to purchase crypto assets, despite the exchange not being registered in the state. In addition to the lawsuit, James and the OAG insist that the second-largest crypto asset by market capitalization, ethereum, is a security.
Why Ethereum Is Considered a Security According to New York’s OAG
Two weeks ago, New York attorney general Letitia James and the Office of the Attorney General (OAG) filed a lawsuit against Coinex. On Thursday, the OAG filed a lawsuit against the crypto trading platform Kucoin. The charges against Kucoin include failing to register as a securities and commodities broker-dealer and falsely representing itself as an exchange. James detailed that through the action, she hopes to ban Kucoin from operating in New York and said it was her latest enforcement action to “rein in cryptocurrency platforms.”
The lawsuit also details that the crypto assets ethereum (ETH), terra (LUNA), and terrausd (UST) are securities. “The petition argues that ETH, just like LUNA and UST, is a speculative asset that relies on the efforts of third-party developers in order to provide profit to the holders of ETH,” the complaint’s press release details on Thursday. Because the state of New York’s OAG believes these crypto assets are securities, Kucoin failed to register as a licensed broker in the state. The lawsuit itself explains why it defines ethereum (ETH) as a security, as it states:
[Ethereum] is promoted as an investment. The developers of [Ethereum] promoted it as an investment that was contingent on the growth of the Ethereum network. For instance, the Ethereum Foundation notes on its website that many [Ethereum] users ‘see it as an investment, similar to Bitcoin and other cryptocurrencies.’ In addition, the ICO Documents included representations that [ethereum] production would dramatically slow over time, resulting in [ethereum] becoming increasingly scarce and, thus, more valuable.
While the news of Kucoin being sued by James and the OAG is interesting, the crypto community has been focused on the fact that the New York Attorney General is calling ethereum (ETH) a security. After James’ press release and the court filing were published, the topic of whether or not ethereum is a security has become a topical conversation on social media and crypto forums.
The crypto economy is down following the news, now under the $1 trillion range, down 6.74% to $942 billion. Bitcoin (BTC) lost 7.76% in the past 24 hours, and ethereum (ETH) has shed 7.54% against the U.S. dollar.
Do you think the New York attorney general’s actions will have a significant impact on the regulation of cryptocurrency platforms, and do you agree with the declaration of ethereum as a security? Share your thoughts about this subject in the comments section below.