Michaela
The U.S. Securities and Exchange’s (SEC) Acting Chair Mark Uyeda noted the legal uncertainty surrounding crypto securities laws, stressing the need for clearer regulatory guidance.
At the inaugural roundtable of the SEC’s Crypto Task Force, Acting Chair Uyeda addressed the ongoing legal uncertainty surrounding the classification of crypto assets under federal securities laws.
Uyeda emphasized the importance of providing clearer guidance to market participants and suggested that the SEC should explore rule making rather than relying solely on enforcement actions to define crypto’s legal status.
In his speech, the acting chair acknowledged that since Bitcoin’s creation in 2008, regulators, market participants, and courts have debated whether crypto assets meet the legal definition of investment contracts. The primary legal standard used is the Howey Test, a Supreme Court ruling from 1946 that defines what qualifies as a security.
However, the courts have issued conflicting rulings on how the Howey Test applies to crypto, causing uncertainty for investors and companies. “Seventeen years later, market participants, lawyers, academics, policymakers, and regulators are still grappling with critical questions related to the status of these novel crypto assets under the federal securities laws,” Uyeda stated.
Uyeda noted that appellate courts have issued conflicting rulings on key aspects of the decision, emphasizing the legal uncertainty surrounding its interpretation.
Additionally, Uyeda pointed out that courts differ in their interpretation of investor reliance, with some requiring all investors’ success to hinge on the promoter’s expertise, while others consider it sufficient if an investor’s financial outcome is tied to the efforts of the promoter or third parties.
Furthermore, appellate courts remain divided on whether an investment contract necessitates ongoing efforts from the promoter after a sale or if substantial managerial actions taken before the purchase are enough to meet the legal threshold.
The acting chair noted, however, that differing interpretations among appellate courts are common, emphasizing that legal disagreements on such matters are not unprecedented. “After all, a judicial opinion is limited to the particular facts and circumstances of that case,” Uyeda stated.
“When judicial opinions have created uncertainty for market participants in the past, the Commission and its staff have stepped in to provide guidance,” he added.
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Michaela has no crypto positions and does not hold any crypto assets. This article is provided for informational purposes only and should not be construed as financial advice. The Shib Magazine and The Shib Daily are the official media and publications of the Shiba Inu cryptocurrency project. Readers are encouraged to conduct their own research and consult with a qualified financial adviser before making any investment decisions.
