Bad news for global crypto exchange KuCoin. It is being taken to court by the US state of New York, the Attorney General (AG) of New York, Letitia James, has reported. According to her, KuCoin has violated securities laws in the state by selling cryptocurrencies as securities, ie securities, to facilitate. Particular in the indictment is the fact that ethereum (ETH) is specifically listed as such security.
KuCoin in court
The charge claims that KuCoin ran a marketing campaign to attract New York residents and encouraged them to trade on their platform. This is considered a violation of the Martin Act, a law that prohibits the sale of unregistered securities and commodities in New York State.
As a result of the lawsuit, KuCoin’s AG is demanding an immediate halt to the sale of these unregistered securities and commodities to New York residents, as well as the payment of an undisclosed amount in fines.
Is ethereum a security?
What is immediately striking about the indictment is the fact that some cryptocurrencies directly labeled as securities. These include LUNA, UST, and in particular ETH. This is the first time that a regulator or legislator in the United States specifically refers to ethereum as such.
According to James, ETH meets all the conditions to be seen as security. In addition, the recent lawsuit between the American Securities and Exchange Commission and crypto project LBRY cited by AG James.
Was in it a while back crypto news read that the the judge here a verdict stating that the LBRY crypto was a security. At the time, there was already a fear that this ruling would be used as case law in other court cases in the future. So we didn’t have to wait long for this.
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
The consequences of this lawsuit could be significant, especially for crypto exchanges operating in New York State. If ethereum is indeed classified as security by the court in this case, many of these exchanges will have to overhaul their business operations in order to remain in compliance with applicable securities laws.
On the other hand, it could also provide an answer once and for all to a question that has been causing confusion within the entire crypto market for years.