SEC Announces Major Clarification on Crypto Asset Securities

The U.S. Securities and Exchange Commission (SEC) has clarified the term “crypto asset securities.” This move aims to address confusion surrounding its use in ongoing litigation against Binance.

In a revised complaint, the SEC emphasized that it does not consider crypto assets themselves to be securities. Instead, the term refers to the contracts, expectations, and understandings surrounding the sale and promotion of these assets.

Defining Crypto Asset Securities

This clarification stems from the SEC’s previous use of the term, particularly in footnote 6 of its amended complaint against Binance. The SEC noted that while the term is useful as shorthand, it may have inadvertently caused misunderstandings.

The commission referenced past cases to highlight that the securities in question are not the crypto assets themselves but the investment contracts related to their sale and distribution.

The court document stated,

“To avoid confusion, the PAC will no longer use the abbreviation, and the SEC apologizes for any confusion it may have caused.”

Ripple’s Chief Legal Officer, Stuart Alderoty, criticized the SEC’s clarification and assessed the agency’s inconsistent stance.

Alderoty pointed out,

“Thus, the SEC finally admits that ‘crypto asset securities’ is a made-up term, and to prove ‘crypto asset securities’ as an investment contract, the SEC needs evidence of a series of ‘contracts, expectations, and understandings.’”

The debate continues, with critics arguing that the SEC’s position fosters legal uncertainty. Massachusetts U.S. Senate candidate John E. Deaton added,

“The SEC likes ambiguous laws,”

reflecting frustrations from previous cases like the Ripple lawsuit.

As regulators and market participants adapt to these interpretations of crypto asset classification, this clarification could significantly impact the cryptocurrency industry.

Sentiment: Neutral