CFTC announces SEC categorization of nine tokens

Caroline Pham, one of the five CFTC commissioners, is concerned about the SEC’s prosecution against a former Coinbase product manager.

Pham said Thursday that the SEC lawsuit against former Coinbase product manager Ishan Wahi, his brother Nikhil Wahi, and colleague Sameer Ramani “may have wide consequences” beyond the case since it labelled nine tokens “crypto asset securities” within the regulatory body’s jurisdiction.

The lawsuit claimed that the Wahis and Ramani used Coinbase’s proprietary token listing information to make advance purchases.

The SEC classified Powerledger (POWR), Kromatika (KROM), DFX Finance (DFX), Amp (AMP), Rally (RLY), Rari Governance Token (RGT), DerivaDAO (DDX), LCX, and XYO—9 of the 25 cryptocurrencies the three allegedly used to make $1.1 million—as securities.

Pham called the SEC’s moves “regulation by enforcement” rather than addressing whether crypto assets are securities “via a transparent process that includes the public to build an appropriate policy with expert input.”

“Regulatory clarity comes from being transparent, not in the dark,” Pham remarked. “Given the overriding public interest and open questions on the legal statuses of various digital assets, such as certain utility tokens and DAO-related tokens, the CFTC should use all means available to fulfil its statutory mandate to vigorously enforce the law and uphold the Commodity Exchange Act.”

Coinbase called the SEC allegations an “unfortunate diversion” in an April blog post update on Thursday. In parallel with the SEC’s case, the U.S. Attorney’s Office for the Southern District of New York filed an indictment but did not label any of the tokens involved—Tribe (TRIBE), Alchemix (ALCX), Gala (GALA), Ethereum Name Service (ENS), POWR, and XYO—as securities.

The company said the DOJ did not charge securities fraud. “Our platform has no securities.”

According to SEC enforcement director Gurbir Grewal, some crypto assets used were securities. The regulator sought permanent injunctions, disgorgement, and civil penalties.

The CFTC and SEC label digital assets as commodities or securities in the US, overlapping their jurisdictions. In June, Senators Cynthia Lummis and Kirsten Gillibrand introduced a bill to give the CFTC “clear authority over applicable digital asset spot markets.” In a Tuesday interview, Lummis said the measure was “more likely to be postponed until next year.”