Our Chief Regulatory and Strategy Officer Jennie Levin did a remarkable job analyzing the recent Cumberland suit here. 🔍 Read this thread for a clear perspective on the case.
Yesterday, the SEC once again cracked its crypto whip when it filed a lawsuit against Cumberland. Let's examine the lawsuit against Cumberland and its significance to the industry. 👇 🏛️ The SEC's Allegations: → Cumberland violated Exchange Act 15(a) by failing to register as a broker-dealer. → Focuses on five digital assets – four of which are central to Crypto.com's recent lawsuit against the SEC. ⚠️ Note: The SEC has dropped "crypto asset security" in favor of "crypto assets offered and sold as securities." 🗣️ The SEC's Complaint → Rehashes its typical allegations about how the token issuers/promoters of each token offered and sold the token originally as an investment contract. → Adds a handful of allegations purporting to show how Cumberland made statements to counterparties about each of the tokens that “reinforced investors’ reasonable expectation of profits.” Most allegations focus on Cumberland's general discussion of historical price and liquidity rather than promises of future profits. ⚠️ Note: These additional allegations are, of course, designed to deal with the problem they ran into in the Binance case, where the judge dinged the SEC for not alleging the facts around how the tokens were offered on that platform. 📜 The Unwritten Rule This complaint is further evidence of the SEC's unwritten rule: → Almost all digital assets - aside from ETH and BTC – can never be sold outside of an investment contract ⚠️ Note: Cumberland's response to the lawsuit (see below) reveals that the SEC told them to use their B-D license only for BTC and ETH trading – This further confirms that the SEC has an unwritten rule that everything else is a security. 🌐 SEC Overreach is Becoming More Flagrant As the SEC expands outward by attempting to apply its “unwritten rule” to more types of market participants, the ridiculousness of its position becomes even more evident: → Cumberland differs vastly from exchanges like Coinbase, Binance, and Kraken. → Cumberland's counterparties are high-net-worth individuals and entities, not retail buyers, like those that buy on Coinbase, Binance, and Kraken. 👉 The Bottom Line 👈 The SEC's approach is becoming increasingly problematic as it tries to fit the square peg of crypto into the round hole of traditional securities regulation. This case against Cumberland highlights the need for: 👉 Clear crypto-specific legislation. 👉 Recognition of the diverse nature of crypto market participants. 👉 A more nuanced approach to regulation that does not treat the sale of all digital assets as securities. As the industry pushes back, we're likely to see more legal battles that will hopefully reshape the regulatory landscape. What's your take on the SEC’s latest move? Let's discuss. 👇 #SECCrypto #CryptoRegulation #DigitalAssetLaw