U.S. Securities and Exchange Commission

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U.S. Securities and Exchange Commission
Founded 1934
Headquarters Washington, D.C.
Key People Jay Clayton, Chair; Valerie Szczepanik, Senior Advisor for Cryptocurrency; Hester M. Peirce, Commissioner, notable crypto proponent
Products U.S. government securities regulation
Twitter @SEC_news
Facebook secenforcement
Website SEC.gov
Releases Company News

The U.S. Securities and Exchange Commission (SEC) is the U.S. regulatory agency charged with the oversight of securities markets and market participants in the U.S. Its mission is to protect investors, to maintain fair, orderly, and efficient markets, and to facilitate capital formation.

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The SEC and Cryptocurrency

The SEC is also one of the main U.S. government institutions tasked with the regulation of cryptocurrency issuance and trading, along with the CFTC. In June 2018, the SEC appointed Valerie Szczepanik as associate director of the Division of Corporation Finance and senior adviser for digital assets and innovation.[1]

Starting in 2013, the SEC has alerted the investing public about some of the risks associated with cryptocurrency investments and investment schemes.[2][3]

In December 2018, Szczepanik said at a New York event hosted by Wall Street Blockchain Alliance (WSBA) that some digital token projects, such as initial coin offerings (ICOs) could possibly bypass SEC regulations by obtaining "no-action" letters from the SEC. This would require the SEC to examine their project and verify that their offering is not a security.[4]

Exchange Traded Bitcoin Products and Funds (Bitcoin ETF)

Cboe's Bats BZX Exchange applied to the SEC in June 2016 to list shares in the Winklevoss Bitcoin Trust. Under delegated authority the SEC's Division of Trading and Markets disapproved the application in March 2017. Shortly thereafter, Bats requested a review by the commissioners. The Commissioners disapproved the application in July 2018 noting that the record presented by the application and the record before them did not demonstrate that bitcoin and bitcoin markets are "uniquely resistant to manipulation." Commissioner Hester M. Peirce dissented.[5]

Acting under authority delegated by the Commission, on August 22, 2018 the SEC's Division of Trading and Markets disapproved another application from the BZX Exchange to list bitcoin-based ETFs. These were to be tied to bitcoin futures contracts traded on the affiliated Cboe Futures Exchange and the CME Group instead of to bitcoins themselves. In accordance with the SEC's guidance on the Winklevoss Bitcoin Trust ETF proposal, BZX asserted that it would have access to the necessary surveillance information from those CFTC-regulated exchanges through all of their memberships in the Intermarket Surveillance Group. In this case, the SEC's disapproval was based on the inadequate size of the bitcoin futures market relative to the markets for bitcoin itself.[6] On the same date the SEC also disapproved proposals from Intercontinental Exchange Group Inc.'s NYSE Arca Exchange for the same reason - that the record did not demonstrate that the futures markets were of significant size relative to bitcoin.[7][8] On August 23, 2018 the SEC informed both BZX and Arca that the disapprovals were to be reviewed by the full Commission.[9] Commissioner Peirce announced the review on her Twitter feed the same day.[10]

In September 2018, the SEC began seeking public feedback about a bitcoin ETF, and cryptocurrency regulation in general. Naeem Aslam, an analyst at ThinkMarkets U.K., wrote in October that bitcoin "needs some sort of blessing" from regulators in order for crypto markets to rally. He went on to say that the SEC seeking public opinion about a bitcoin ETF is a "positive sign," saying that he believes the commission is attempting to accurately assess the crypto markets landscape while respecting public opinion.[11]

In late November, the SEC's chairman, Jay Clayton, said at a conference in New York City that the SEC is unlikely to approve of a bitcoin ETF any time soon. Clayton said the main reason for this is the lack of safeguards in the crypto space protecting users from hacking attacks or price manipulation.[12]

Cryptocurrencies as Securities

In July 2017 the SEC issued an investigative report about the DAO, in which it clarified its views on the rapidly developing markets for ICOs, which were gaining widespread investor attention at the time.[13] The DAO was a German cryptocurrency-based venture capital fund which failed shortly after its launch in May 2016. According to the report, almost any cryptocurrency that results from an ICO would be viewed as a security in accordance with the "Howey Test." Subsequently, the SEC and its chairman, Jay Clayton, made a number of statements and issued warnings to the public regarding ICOs.[14][15] In May 2018, to alert the public to the risks of the ICO market, the SEC launched a "Potemkin Village" website, called HoweyCoins.com, in order to caution potential traders and demonstrate the ease with which an investor scam can be deployed.[16]

The director of the SEC Division of Corporation Finance, William Hinman, advised in a speech on June 14, 2018 that the great majority of digital and cryptocurrencies were probably securities under the Howey test. While ether might have been originally issued as a security, Hinman expressed the view that both bitcoin and ether likely did not function as securities in the current marketplace, removing them from SEC jurisdiction.[17]

On September 11, 2018 U.S. federal district Judge Raymond Dearie in New York affirmed the SEC's jurisdiction over ICOs when he denied the motion by the defendant, Maksim Zavlavskiy, to dismiss the SEC's complaint. Zavlavskiy asserted that his ICO should be regulated as a currency not a security. This was the first legal test for the SEC's authority over the ICO market.[18]

In November, the SEC published a statement on their website called "Statement on Digital Asset Securities Issuance and Trading." The statement referenced the commission's recent crackdown on crypto-centric companies like TokenLot and AirFox, as well as the founder of EtherDelta, as examples of how U.S. securities laws will be enforced with cryptocurrency companies in the future.[19]

Enforcement Actions

In January 2018, the SEC sued Jared Rice Sr., CEO of the cryptocurrency platform AriseBank for issuing unregistered securities during an ICO. Stanley Ford, the co-founder of AriseBank, was sued on the same charges.[20]

After publishing its report on the DAO in July 2017, the SEC took enforcement actions against a number of entities for various violations of securities laws. Some of the most prominent ones involving ICOs are RECoin Group, PlexCorps, Munchee, AriseBank, Jon E. Montroll and BitFunder, CentraTech, Titanium, and Tomahawk, in which cases the SEC alleged fraud in addition to failure properly to register.[21][22] In April 2017, the commission moved against Longfin, a cryptocurrency firm, for fraud in connection with the issuance of new securities.[23]

According to the National Law Journal, 30 percent of ICO-related lawsuits filed in 2018 were filed by the SEC.[24]

In its first registration case against a trading platform, the SEC on November 8, 2018 announced that it had settled charges against EtherDelta for trading tokens with out registering as a securities exchange. The SEC also settled charges against EtherDelta's founder, Zachary Coburn.[25][26]

Trading Platforms

On March 7, 2018 the staff of the SEC's Divisions of Enforcement and Trading and Markets issued guidance to investors who might use unregistered platforms to trade crypto currencies and security tokens. The statement noted that many online platforms are called "exchanges" by their proprietors although they do not fulfill the requirements of a securities exchange or other SEC regulated platform.[27]

In July 2018, FINRA approved Coinbase's acquisition of three companies already registered as broker-dealers - Keystone Capital Corp., Venovate Marketplace Inc., and Digital Wealth LLC - which Coinbase says will enable it to offer security tokens legally, under SEC authority.[28]

Form D Exemptions

A popular practice for ICOs wishing to avoid punitive measures by the SEC is filing for a Form D exemption. This practice, which became popular among ICOs in 2018, involves filling out SEC Form D, which are notices filed by a company for an offering that is exempt from SEC registration requirements. Companies filing Form D have to do so within 15 days after the first sale of a securities offering, rather than before the sale. Form D notices require that only "accredited" investors can invest in this sale; accredited investors include individuals with a net worth exceeding $1 million, or have consistently made over $200,000 per year in income in the prior two years before the sale, or companies that have over $5 million in assets.[29][30]

Crypto Markets Surveillance

The SEC put out a notice January 31, 2019 requesting help from the private sector - specifically, Big Data firms - to find a way to "monitor risk and improve compliance" for the "most widely-used" blockchain ledgers by trade volume. The SEC also said that this tool should be in an "easily viewable" format.[31][32]

Key People


  1. SEC Appoints New Crypto Chief to Oversee Digital Assets and ICOs. Fortune.
  4. SEC’s Crypto Czar Signals Some Flexibility on Token Offerings. Coindesk.
  5. Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Order Setting Aside Action by Delegated Authority and Disapproving a Proposed Rule Change, as Modified by Amendments No. 1 and 2, to List and Trade Shares of the Winklevoss Bitcoin Trust. U.S. Securities and Exchange Commission.
  6. Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order Disapproving a Proposed Rule Change to List and Trade the Shares of the GraniteShares Bitcoin ETF and the GraniteShares Short Bitcoin ETF. U.S. Securities and Exchange Commission.
  7. Self-Regulatory Organizations; NYSE Arca, Inc.; Order Disapproving a Proposed Rule Change Relating to Listing and Trading of the Direxion Daily Bitcoin Bear 1X Shares, Direxion Daily Bitcoin 1.25X Bull Shares, Direxion Daily Bitcoin 1.5X Bull Shares, Direxion Daily Bitcoin 2X Bull Shares, and Direxion Daily Bitcoin 2X Bear Shares Under NYSE Arca Rule 8.200-E. U.S. Securities and Exchange Commission.
  8. Self-Regulatory Organizations; NYSE Arca, Inc.; Order Disapproving a Proposed Rule Change to List and Trade the Shares of the ProShares Bitcoin ETF and the ProShares Short Bitcoin ETF. U.S. Securities and Exchange Commission.
  9. Letter from Secretary. U.S. Securities and Exchange Commission.
  10. Personal Tweet from Hester Peirce. Twitter.
  11. Bitcoin needs a blessing from the SEC, says analyst. MarketWatch.
  12. Bitcoin ETFs Roadblocked by Lack of Safeguards, SEC's Chief Says. Bloomberg.
  13. Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The DAO. U.S. Securities and Exchange Commission.
  14. SEC Statement Urging Caution Around Celebrity Backed ICOs. SEC Division of Enforcment and Office of Compliance Inspections and Examinations.
  15. Chairman’s Testimony on Virtual Currencies: The Roles of the SEC and CFTC. U.S. Securities and Exchange Commission.
  16. THE SEC HAS AN OPPORTUNITY YOU WON’T WANT TO MISS: ACT NOW!. U.S. Securities and Exchange Commission.
  17. Digital Asset Transactions: When Howey Met Gary (Plastic). U.S. Securities and Exchange Commission.
  18. U.S. Judge Says Initial Coin Offering Covered by Securities Law. Bloomberg.
  19. Statement on Digital Asset Securities Issuance and Trading. SEC.
  20. FBI Arrests AriseBank CEO Over $4 Million Crypto Fraud. Coindesk.
  21. Developments in Virtual Currency Law and Regulation. Gibson Dunn.
  22. US SEC smacks ICO fraudster with lifetime ban and $30,000 penalty. Lexology.
  23. Corporate Crime monthly update - April 2018. Lexology.
  24. Lawsuits Involving Cryptocurrency Hit All-Time High. International Business Times.
  25. Crypto Exchange Founder Fined in SEC's First Registration Case. Bloomberg.
  26. SEC Charges EtherDelta Founder With Operating an Unregistered Exchange. U.S. Securities and Exchange Commission.
  27. Statement on Potentially Unlawful Online Platforms for Trading Digital Assets. U.S. Securities and Exchange Commission.
  28. Coinbase Says It Has Green Light to List Coins Deemed Securities. Bloomberg.
  29. ICOs continue to raise money via SEC back door. MarketWatch.
  31. US SEC Seeking Big Data Tool for Major Blockchains. Coindesk.
  32. Solicitation Number: 50310219Q0041 Notice Type: Sources Sought. SEC.