- U.S. court has ruled that crypto trades on platforms like Coinbase can be classified as securities transactions.
- The decision intensifies the debate over cryptocurrency regulation and the SEC’s oversight role.
U.S. court has declared that certain crypto asset transactions on secondary markets, such as Coinbase, are indeed securities transactions. This decision emerged from an insider trading case involving Ishan Wahi, a former product manager at Coinbase, his brother Nikhil Wahi, and their associate Sameer Ramani.
Insider Trading Allegations and Crypto Regulation
The case, which drew considerable attention from both the crypto industry and regulatory bodies, centered on allegations of insider trading.
The court’s judgment, especially significant due to its implications on the classification of cryptocurrencies as securities, was delivered on March 1, marking a pivotal moment in the ongoing debate surrounding crypto regulation, continuing what was previously highlighted in the ETHNews report.
Central to the court’s decision was the application of the Howey test, a criterion used to determine whether certain transactions qualify as investment contracts and thus fall under the securities category.
The ruling highlighted that the issuers of the crypto assets in question continued to promote the profitability of their tokens even as they were traded on secondary markets like Coinbase. According to the court, this sustained promise of profit fulfills the Howey test’s criteria, rendering the crypto assets as investment contracts.
Ramani’s Default Judgment and Flight
A notable aspect of this case was the default judgment against Sameer Ramani, who is believed to have fled the country to evade criminal prosecution. A default judgment is issued when a defendant fails to respond to a court summons or appear in court, as was the case with Ramani.
This case follows the May 2023 settlement between the SEC and the Wahi brothers, dubbed the “first-ever insider trading case involving cryptocurrency markets.”
The current judgment gains further importance in the context of the persistent debate between the crypto industry and regulatory authorities over whether cryptocurrencies should be classified as securities and fall under the SEC’s purview.
SEC Chair Gary Gensler has been vocal about his view that most cryptocurrencies meet the criteria for securities, necessitating crypto exchanges to register with the SEC. To explore this latest development more thoroughly, you can watch this YouTube video.