On April 17, 2023, the SEC sued Bittrex for acting as an unregistered securities exchange, broker-dealer, and clearing agency.1 Only a few weeks ago, the company announced it would exit the U.S. due to “continued regulatory uncertainty.”
While asserting that, in order to prevail on its claims, it only has to establish that Bittrex listed a single security, the SEC provided what it called a “non-exhaustive list of crypto asset securities” available for trading on the exchange. The most prominent of the tokens identified was ALGO which, a keen observer might note, is traded also on Coinbase and Kraken.
LEGAL TOKENS
In the near term, it seems we have a few more years of regulatory uncertainty ahead. After all, it’s 28 months and counting since the SEC sued Ripple. Long term, let’s assume the SEC is able to convince a federal court that at least one of the tokens listed on Bittrex was a security. Same for Coinbase. Same for Kraken. Then what?
Maybe exchanges pay fines and continue operating, listing all the tokens the SEC (or private litigants) cannot or have not yet proven in court are securities. Maybe exchanges simply exit stage left, as Bittrex had already decided to do.
1 The complaint also alleges control person liability against Bittrex co-founder William Hiroaki Shihara.
