CFTC criticises SEC suit against former Coinbase product manager

The U.S. Securities and Exchange Commission (SEC) suit against former Coinbase product manager Ishan Wahi could have serious implications for the crypto industry, as the agency characterised nine tokens as “digital securities”. This was stated by CFTC Commissioner Caroline Pham.

Read my statement on #SEC v. Wahi, regulation by enforcement & #CFTC authority #crypto #digitalassets #DAO pic.twitter.com/xbHvyshx8l

— Caroline D. Pham (@CarolineDPham) July 21, 2022

On July 21, the U.S. Department of Justice said that Wahi and his brother Nikhil were arrested. They face charges of fraud involving insider trading. Another co-defendant is Samir Ramani.

According to investigators, they used confidential information about upcoming Coinbase listings of digital assets to execute profitable trades.

The SEC filed against the suspects with similar allegations, emphasising that it concerns securities fraud.

Thus the agency classified 9 of the 25 cryptocurrencies that the defendants used in their operations. In this list were Powerledger (POWR), Kromatika (KROM), DFX Finance (DFX), Amp (AMP), Rally (RLY), Rari Governance Token (RGT), DerivaDAO (DDX), LCX and XYO.

According to Pham, the Commission’s actions are an example of “regulation through enforcement”. She emphasised that the SEC does not wish to determine whether a token belongs to the class of securities “in a transparent process in which the public and invited experts participate.”

“Regulatory clarity comes when everything is open, not when it is dark around. Given the paramount public interest and unresolved questions about the legal status of various digital assets such as utility tokens and governance tokens of a decentralised autonomous organisation (DAO), the CFTC should use all available means to enforce its mandate to scrupulously follow the laws and comply with the Commodity Exchange Act,” she wrote.

Coinbase, which is conducting its own investigation into the incident, also criticised the SEC’s actions. The company stressed that on its platform no securities are traded.

“Assets listed on our platform are not securities. The SEC’s allegations merely distract law enforcement,” the exchange said.

Back in July 2022, U.S. Representative Tom Emmer said that the SEC is hindering regulation of the cryptocurrency industry and is acting unethically towards its participants.

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