{"id":4873,"date":"2023-05-19T17:51:08","date_gmt":"2023-05-19T21:51:08","guid":{"rendered":"http:\/\/leadingcryptonews.com\/avoid-trading-at-all-costs\/"},"modified":"2023-05-19T17:51:08","modified_gmt":"2023-05-19T21:51:08","slug":"avoid-trading-at-all-costs","status":"publish","type":"post","link":"https:\/\/leadingcryptonews.com\/avoid-trading-at-all-costs\/","title":{"rendered":"Avoid Trading at All Costs"},"content":{"rendered":"
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The line demarcating cryptos and traditional financial instruments has become a source of rigorous debate among market participants and regulators. The US Securities and Exchange Commission (SEC) has emerged as a central figure in this conversation, primarily due to its role in regulating securities. <\/strong><\/p>\n Recent decisions by the SEC have now firmly classified certain cryptos as securities, a move with substantial implications for investors, exchanges, and the broader industry.<\/p>\n The SEC has asserted that many digital tokens constitute securities, applying standards established under the Securities Act of 1933 and further interpreted by several landmark court decisions. <\/p>\n The pivotal case, SEC v. W. J. Howey Co., set forth the \u201cHowey Test\u201d criteria to determine whether a transaction qualifies as an investment contract, a type of security. This test checks if a transaction involves an investment in a common enterprise, expecting profits primarily from others\u2019 efforts.<\/p>\n Applying these criteria to the cryptocurrency market, the SEC has underscored the likelihood that several tokens meet this definition, therefore requiring adherence to established securities laws.<\/p>\n In a significant move, the SEC has recently pinpointed several cryptocurrencies as securities. This crypto securities list encompasses: <\/p>\n The inclusion of Filecoin was particularly contentious, considering its broad trading base on multiple US exchanges and its previous plans for a proposed trust with Grayscale Investments. The unexpected SEC determination resulted in the termination of the trust proposal, leaving stakeholders to grapple with the implications.<\/p>\n \u201cGrayscale does not believe that FIL is a security under the federal securities laws and intends to respond promptly to the SEC staff with an explanation of the legal basis for Grayscale\u2019s position,\u201d the company said. <\/p>\n<\/blockquote>\n Selling unregistered securities generally constitutes a violation of US law. This regulation necessitates that securities undergo registration with the SEC before their sale to the public. <\/p>\n While there are exemptions to this rule\u2014like sales to accredited investors or private placements\u2014unregistered securities\u2019 sale could lead to significant penalties, including fines and profit disgorgement.<\/p>\n In light of the SEC\u2019s new classification, exchanges listing these tokens could face legal scrutiny. Some US exchanges already list over a dozen cryptos the SEC classifies as illegal to sell, which might trigger regulatory actions and subsequently impact their operations.<\/p>\nThe SEC\u2019s Perspective on Cryptos and Securities<\/h2>\n
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Understanding the Consequences of Trading Crypto Securities<\/h2>\n