In brief
- New York prosecutors unsuccessfully sought the SEC’s opinion on Ethereum’s security status in 2023 to strengthen their case against KuCoin, according to records obtained by Coinbase through a FOIA request.
- Internal communications revealed through Coinbase’s FOIA request expose regulators’ uncertainty about crypto regulation despite their aggressive legal actions against digital asset companies.
- Documents show the SEC’s private reluctance to clearly define its regulatory stance while simultaneously pursuing enforcement actions, including correspondence with Ripple Labs regarding concerns about securities law violations.
New York prosecutors tried and failed to solicit the Securities and Exchange Commission’s opinion on Ethereum to bolster their case against KuCoin in 2023, according to newly released SEC records acquired by Coinbase.
The exchange is one of many private conversations unearthed by a Coinbase FOIA request, offering a glimpse at the behind-the-scenes politicking that has shaped U.S. authorities’ approach toward the crypto industry over the past few years.
In an email dated June 2023, the New York Attorney General’s Investor Protection Bureau Chief Shamiso Maswoswe asked the Securities Commission whether it considered Ethereum a security or a commodity.
“We would like to request that the SEC file an amicus in support of the argument that Ether is a security,” Maswoswe said in the email. “I think it would be beneficial to investor protection to get a court to hold that Ether is a security.”
She added, “I understand that you rarely get involved at the trial level—but rarely doesn’t mean never.”
The exchange is part of a trove of internal records that detail exchanges between the Securities Commission and various state and federal agencies about the cryptocurrency industry.
The emails, which Coinbase obtained through the FOIA process and released on Wednesday, underscores regulators and authorities’ uncertainty over how to regulate digital assets companies, even as they pursued highly public cases against crypto exchanges and other such firms.
The disconnect between the securities regulator’s private reluctance to opine on its guiding principles and its vigorous legal pursuits of crypto firms is apparent in several of the federal agency’s emails and letters, including one record of an exchange between the Commission and Ripple Labs from 2021.
In a letter dated December 9 2021, the SEC requested information about Ripple Labs’ planned launch of its Liquidity Hub, asking whether the company had ensured it would not commit “violation[s] of the federal securities laws.”
“We are concerned that Ripple, either directly or indirectly, is planning to facilitate the offer and sale of XRP and other digital assets that are securities,” the SEC wrote in the letter.
Ripple rebuffed the Commission’s request in a letter dated December 23, 2021.
“There is no requirement or obligation the Ripple consult with the SEC over how to conduct its business,” the response reads.
Edited by Stacy Elliott.
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