In April of this year, Bittrex and its co-founder/CEO William Shihara were charged by the SEC for operating an unregistered national securities exchange, broker and clearing agency.
A separate charge was also filed against Bittrex Global. This filing was a little bit before all of the other actions taken against exchanges like Coinbase and Binance, but the SEC moved in lock step as it went after all of these crypto giants.
Bittrex is not quite as large as Coinbase and Binance. Notably, their legal team is far from as sophisticated as Coinbase.
Coinbase is leading the charge in building a narrative against the SEC's actions against them. Whether or not that narrative is correct - and I think most of us in this space believe it to be correct - the general theme is that the SEC is performing an enforcment-first approach to this industry.
There seems to be bad blood and a general distaste for crypto by the SEC and its current leader; Gary Gensler.
Bittrex has been thrown into the cross-hairs and has been winding down their operations in the US for a few months now.
Today, they filed a motion to dismiss the case that the SEC has thrown against them. They are generally stating that the SEC doesn't have the authority to regulate cryptocurrencies as securities unless congress specifically greenlights it.
This is a similar narrative to what Coinbase is stating as well.
Coinbase has also been publicly stating for months now that they have tried to work with the SEC to establish a more defined and clear regulatory framework for digital assets.
Coinbase and Brian Armstrong have said numerous times that the SEC was silent and unwilling to work with them despite their best efforts.
Bittrex, Coinbase, Binance and others should all adopt the same narrative - in my opinion - and challenge the SEC on their actions.
It's not clear if they would win, but numbers would help. It's good to move in coordination with each other on this issue.
Are Digital Assets Securities by Default?
Bittrex, Coinbase and others are making a case that once assets are actively traded on secondary markets, they should not be considered securities but categorized differently and on top of that, the SEC did not give clear guidelines on what is and isn't allowed.
Instead these exchanges were allowed to operate and build for years with no interventions by the SEC except a retroactive case being built against them.
"They argue that once an asset is launched and actively traded on secondary markets, it should no longer be considered a security but rather categorized as a commodity or another class of digital asset."
This is an interesting argument from Bittrex, one that I find particularly fascinating.
Are all digital assets securities?
The SEC has been pretty clear that BTC is not a security. They have been somewhat silent on ETH but most believe that the SEC is deeming it not a security as well.
So it seems that there is an interesting "loophole" here - so to speak.
If a digital asset is launched fairly with no presales, premines or insider exclusivity, then is it not a security?
Further, if a digital asset is simply deployed with basic, open and fair mining procedures, is NOT sold privately to any investors and is also then traded on the secondary market by users, is it NOT a security?
Bringing Hive into this context - HIVE is a fork of STEEM. There is no premine, investor sale or even centralized company with team stake.
Is HIVE not a security because it is fairly mined by the users through Proof of Brain?
All interesting questions. Aligning with Bittrex and Coinbase would tell us that if the trading is all secondary market and there is no exclusive launch / pre-sale / ICO, etc. then it is NOT a security but rather a commodity.
What are your thoughts on Bittrex and also this broader issue of securities and the secondary market? Leave a comment below!
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