Caroline Pham, one of the five commissioners of the CFTC (Commodity Futures Trading Commission in the US), has expressed concerns about the potential impact of a case that the US Securities and Exchange Commission or SEC is pursuing against a former product manager at Coinbase.
Specifically, Pham noted that the SEC’s complaint against former Coinbase product manager Ishan Wahi, his brother Nikhil Wahi and his partner Sameer Ramani could have broad implications beyond this case, given the point being made that nine tokens are “securities” and thus fall under regulatory authorities.
What the complaint states and which tokens it affects
According to the complaint, the Wahis and Ramani engaged in insider trading using confidential information that Ishan received from Coinbase about the tokens that would be imported into the exchange in order to purchase them in advance.
The SEC refers to the following tokens, which it considers to be securities and thus should be removed from cryptocurrency exchanges:
- Powerledger (POWR),
- Kromatika (KROM),
- DFX Finance (DFX),
- Amp (AMP),
- Rally (RLY),
- Rari Governance Token (RGT),
- DerivaDAO (DDX),
- LCX and
- XYO
These are 9 of the 25 cryptocurrencies that the three aforementioned individuals allegedly used to make $1.1 million in profits.
Regulation through enforcement, not transparency
Pham noted that the SEC’s actions are an example of “regulation through enforcement” rather than addressing the question of whether certain cryptocurrency assets are securities using a transparent process while engaging the public to develop appropriate policy with expert input.
“Regulatory clarity comes with being out in the open and not in the dark,” Pham said, and continued: “Given the overriding public interest and the open questions about the legal status of various digital assets, such as certain utility tokens and DAO-related tokens, the CFTC should use all available means to fulfill its statutory mandate to vigorously enforce the law and comply with the Commodity Exchange Laws.”
Other tokens threatened
In addition, the U.S. Attorney’s Office for the Southern District of New York filed an indictment alongside the SEC case, but did not identify any of the cryptocurrencies (tokens) involved – including
- Tribe (TRIBE),
- Alchemix (ALCX),
- Gala (GALA),
- Ethereum Name Service (ENS),
- POWR and XYO – as securities.
SEC enforcement director Gurbir Grewal said the case against the Wahis and Ramani was based on the “economic reality of an offering,” arguing that some of the cryptocurrency assets used were securities.
The CFTC and the SEC often claim overlapping jurisdictions with respect to the regulation of digital assets in the United States, characterizing them as either commodities or securities based on their respective agencies.
In June, Senators Cynthia Lummis and Kirsten Gillibrand introduced a bill aimed at providing regulatory clarity for the space, giving the CFTC “clear authority over the applicable digital asset markets.” However, Lummis stressed in an interview last Tuesday that the legislation “is more likely to be deferred until next year.”
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