tl;dr
In 2023, New York prosecutors unsuccessfully sought the SEC's opinion on whether Ethereum is a security to support their case against KuCoin, as revealed by SEC records obtained by Coinbase. An email from June 2023 shows the New York Attorney General’s office requesting the SEC to file an amicus bri...
In 2023, New York prosecutors attempted but failed to obtain the SEC's formal opinion on whether Ethereum qualifies as a security, aiming to strengthen their legal case against crypto exchange KuCoin. This effort surfaced through newly released SEC records acquired by Coinbase, exposing a broader backdrop of regulatory ambiguity and internal debates within U.S. authorities overseeing the crypto industry.
The documents, revealed through a FOIA request, showcase the SEC’s cautious approach to defining digital asset regulations privately, even as it aggressively pursued enforcement actions against various crypto firms. This dichotomy is underscored by an email from June 2023, in which Shamiso Maswoswe, Chief of the New York Attorney General’s Investor Protection Bureau, urged the SEC to file an amicus brief asserting Ether as a security to uphold investor protection. She acknowledged the SEC rarely intervenes at trial levels but emphasized the potential benefit of such involvement.
The records illuminate ongoing struggles within federal and state agencies to map out clear guidelines for the regulation of cryptocurrencies, highlighted by the SEC’s reticence to clarify its stance despite taking vigorous legal action. A notable example occurred in 2021, when the SEC questioned Ripple Labs about possible securities law violations involving XRP ahead of its Liquidity Hub launch. Ripple outright refused to engage with the SEC on how it conducts its operations, asserting no obligation to do so.
This combination of private uncertainty and public enforcement efforts has shaped a complex regulatory landscape around digital assets, leaving industry participants navigating a framework still very much in flux. As the SEC continues to litigate aggressively, the absence of clear, authoritative guidance fuels ongoing debate and policymaking challenges within the rapidly evolving crypto market.