Two of the largest cryptocurrencies, Coinbase and Binance, will seek to have their lawsuits resolved favorably. Other smaller legal battles, such as the appeal by the former OpenSea product manager, will also be essential in establishing legal clarity for cryptocurrencies and other blockchain-based technologies in the long term.
While 2024 is already off to a great start, it will not be without regulatory challenges. As the U.S. Securities and Exchange Commission (SEC) and other regulators seek to establish a regulatory framework (or enforce a nonexistent one), the future of cryptocurrencies has yet to be determined.
SEC against Binance: Evasion of US law
Binance, the world’s largest cryptocurrency exchange, was sued late last year by the SEC for what the agency considered a “flagrant disregard of federal securities laws” and their “investor and market protections.” The exchange, like the other defendants, also allegedly operated unregistered, offering “three essential securities market functions” while avoiding US laws through various entities.
According to the agency, this disregard would have allowed Binance and the defendants to “enrich themselves by billions of US dollars” while facilitating money laundering and sanctions evasion. The lawsuit was filed in mid-2023, but it is still an ongoing case, which Binance attempted to dismiss on the grounds that the agency did not have the necessary authority.
Before jumping directly to accusations of fraud, market manipulation, etc., though, the federal judge overseeing the case decided to focus his first efforts on establishing what digital assets are, according to CoinTelegraph.
SEC vs. Coinbase: Are Cryptocurrencies a Security?
The question of cryptocurrencies being a security has long been one of the main topics of discussion when it comes to cryptocurrency regulation. Unlike the SEC’s case against Binance, this is the cornerstone of the agency’s legal battle with Coinbase, a fact that CEO Brian Armstrong was quick to point out hours after the filing. Binance’s lawsuit alleges 13 violations, while Coinbase’s claims are substantially smaller, with only 4, all of them focused on registries.
When US District Judge Analisa Torres sided with Ripple Labs back in 2023 by declaring that XRP did not violate the law because XRP was not a security, most experts saw it as a victory for cryptocurrencies. This was boosted when the SEC saw its appeal request rejected before opting to drop all charges. The Coinbase legal battle will bring greater clarity to what the law considers a security, determining which agency (if any) can regulate it and how.
United States v. Nathaniel Chastain: Can NFTs Be Owned?
Former OpenSea executive Nathaniel Chastain made headlines in 2022 when he was charged with wire fraud and money laundering for running the “first digital asset insider trading scheme.” As a high-level employee, Chastain was in charge of choosing which NFTs would appear on the marketplace’s homepage. According to the charges, Chastain chose to use this information to “secretly purchase dozens of NFTs shortly before they appeared.”
Nearly a year after being convicted in 2023, Chastain is appealing the decision, claiming that the confidential information he possessed “had no commercial value.” Since this meant that the information was not “protected property,” Chastain’s lawyers determined that the conviction had no legal basis.
While this case does not directly relate to NFTs, cryptocurrencies, or any other digital asset, but rather the information surrounding it, its implications have the potential to impact the space. Regulators have long argued that by cracking down on these assets, they are protecting consumers from market manipulation, fraud and similar activities.
By Audy Castaneda
