New York State Attorney General Letitia James filed a lawsuit against KuCoin on Thursday, alleging the crypto exchange is an unregistered commodity and securities broker and dealer that offers securities without registering with the Office of the Attorney General (OAG), including cryptocurrencies like $ETH, $LUNA and $UST, and KuCoin's saving and staking product KuCoin Earn.
In the lawsuit file, James said that these tokens are securities under the Martin Act,
"The Tokens were promoted as profit opportunities that were contingent on the growth of their respective networks, $ETH, $LUNA, and $UST. The growth and development of these networks were dependent on the managerial efforts of the founders and management teams of these tokens and were reasonably believed to lead investors to a profit from their entrepreneurial and managerial efforts. Additionally, sums of the tokens' distribution were reserved for their founders and management teams, thereby appearing to tie the fortunes of the token holder to the management teams, creating a common enterprise. Accordingly, the Tokens were securities."
James asked the court to order KuCoin to stop operation in New York, and to block New York-based IP addresses from accessing KuCoin's app, website and services.
According to CoinDesk, this is the first time a regulator has claimed in court that $ETH is a security. On the definition of $ETH, the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have different opinions. Previously, SEC Chair Gary Gensler said he viewed all digital assets except for Bitcoin as securities, while CFTC Chair Rostin Behnam claimed $ETH was a commodity. James' lawsuit file, however, said that $ETH falls within the Martin Act's definition of both commodities and securities.
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Policy and Regulation