New York files Lawsuit against KuCoin, and claims Ethereum is a Security

New York going after KuCoin and ETH

Hey Peeps!

On March 9th, New York Attorney General Letitia James announced, via press release, a lawsuit against the cryptocurrency exchange, KuCoin.

The Attorney General is suing KuCoin on the grounds of “failing to register as a securities and commodities broker-dealer and falsely representing itself as an exchange”.

The Office of the Attorney General (OAG) stated that despite KuCoin not being registered in New York, they were still able to buy/sell cryptocurrency on the KuCoin platform.

The filed lawsuit is seeking to prevent KuCoin from doing business in the state of New York and “to block access to its website until it complies with the law”.

The lawsuit claims that KuCoin’s Earn program is also a form of unregistered securities.

Here is the actual lawsuit filed into court against KuCoin: https://ag.ny.gov/sites/default/files/2023.03.09_-_memorandum_of_law_-_people_v_mek_global_limited_and_phoenixfin_pte_ltd_dba_kucoin.pdf

“One by one my office is taking action against cryptocurrency companies that are brazenly disregarding our laws and putting investors at risk. Today’s action is the latest in our efforts to rein in shadowy cryptocurrency companies and bring order to the industry. All New Yorkers and all companies operating in New York have to follow our state’s laws and regulations. KuCoin operated in New York without registration and that is why we are taking strong action to hold them accountable and protect investors.”

- Letitia James, Attorney General of the State of New York

Surprisingly, the lawsuit also went on to claim that Ethereum (ETH) was a security, on the grounds that “since transitioning to the proof-of-stake consensus, possession of ETH translates directly to profit potential by earning staking rewards.”

The lawsuit argues that ETH, LUNA, and UST are all speculative assets that rely “on the efforts of third-party developers in order to provide profit to the holders”.

This is actually one of the first times in regulatory history that someone has claimed, in court, that Ethereum is a security.

I am curious to see what may happen as a result of this, and worried it might start a larger investigation into Ethereum and potentially many other cryptocurrencies.

New York is turning into one of the least-friendly states for cryptocurrency in the entire United States.

In just the last two years, Attorney General James has taken legal action against BlockFi, Celsius, CoinEx, and Nexo.

If this lawsuit were successful, KuCoin would be forced to “implement geo-blocking based on IP addresses and GPS location to prevent access to KuCoin’s mobile app, website, and services from New York”.

Luckily, here in the USA, states have different rules and regulations, and for that reason I am thankful this lawsuit is not applying to the rest of the country.

What are your thoughts on this news?

Are you concerned about KuCoin?

Does this news make you consider moving assets off of KuCoin?

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