The U.S. Commodity Futures Trading Commission (CFTC) may have encroached on the authority of the SEC in its lawsuit against the cryptocurrency exchange KuCoin. This was stated by CFTC Commissioner Caroline Pham.
“The lawsuit states that […] securities can themselves constitute leveraged trading under the Commodity Exchange Act. Such an interpretation does not distinguish between investments in a fund, which would typically be securities under the SEC’s jurisdiction, and the trading activity of the fund, which is overseen by the CFTC,” she wrote.
According to Pham, the CFTC’s approach potentially infringes on the SEC’s authority, undermines decades of investor protection laws, and conflates financial instruments with financial activities, thereby destabilizing the foundations of securities markets.
“Owning shares is not the same as trading derivatives,” she emphasized.
Over the past year, disputes have frequently arisen regarding the CFTC and SEC’s oversight of the industry. In April 2023, SEC Chairman Gary Gensler avoided answering a question about the classification of Ethereum. In December, CFTC Chairman Rostin Behnam recognized most cryptocurrencies as commodities. He also noted the competition between the agencies and urged the U.S. Congress to intervene in the dispute.
On March 26, the CFTC filed a lawsuit against KuCoin. The exchange was accused of failing to comply with KYC requirements and not registering as a futures commission merchant, swap execution facility, or designated contract market.
On the same day, KuCoin faced allegations from the U.S. Federal Prosecutor’s Office. The exchange and its two founders were accused of laundering $9 billion, including proceeds from suspicious and criminal activities such as sanctions violations, darknet markets, and ransomware schemes.
Back in March 2023, the New York State Attorney General’s Office accused KuCoin of violating securities laws. In December, the platform agreed to pay over $22 million.