According to a New York judge, both Bitcoin and Ethereum, the top two cryptocurrencies by market capitalisation, can be considered commodities due to their decentralized nature.
This was ruled by the same judge dealing with the SEC vs Coinbase case, whose latest statement is guiding the public debate in reference to the exchange’s alleged violation of US securities laws.
Meanwhile, a lawsuit against Uniswap and its founder ‘Hayden Adams’ has been dismissed over an affair involving the decentralized protocol and the emergence of a large number of token scams.
Full details below.
A New York court has defined both Bitcoin and Ethereum as commodities: the SEC is losing the war against crypto
The latest crypto news is about the decision of a New York court, which on Wednesday during the filing of a proposed class action against DEX Uniswap, explicitly cited that both Bitcoin and Ethereum are classified as commodities.
This was said by Judge Polk Failla, who also indirectly dealt with the SEC’s case against Coinbase, providing a key interpretation for upcoming legal proceedings on this issue.
Hence, the top two cryptocurrencies by market capitalisation are not comparable to financial securities, the sale of which for a broker must be preceded by an authorisation from the market supervisory authorities, but rather to commodities such as gold, platinum, oil, aluminium, palladium and many others.
The New York judge’s decision only sets precedents for the various lawsuits that the SEC has filed over the past three months, raising the hopes of the crypto community for the federal agency’s defeat.
To tell the truth, Gary Gensler himself has never gone so far as to define either Bitcoin or Ethereum as securities, aware that neither has the characteristics to be labelled as such, but has limited himself to attacking the so-called altcoins.
The agency will now have a lot of work to do, both in view of the upcoming deadlines for the long-awaited spot ETFs for the two assets, and with regard to the accusations made by the exchanges Binance and Coinbase, which are vigorously defending themselves before the law.
As far as only Bitcoin and Ethereum are concerned, without mentioning other currencies, the issue seems quite clear, especially given that the two crypto assets have already been present for years on the “Chicago Mercantile Exchange” (CME), a business centre where commodities are mainly traded.
Lawsuit against Uniswap over scam tokens on the protocol is dismissed
The statements by Judge Katherine Polk Failla on the characteristics of Bitcoin and Ethereum, which classify digital currencies as commodities, came in the midst of a lawsuit filed by a group of investors against the decentralised platform Uniswap and its founder “Hayden Adams.”
In April 2022, a group of individuals sued Uniswap as being responsible for issuing scam tokens such as EthereumMax (EMAX), Bezoge (BEZOGE), Alphawolf Finance (AWF) and other ERC-20 tokens, at the same time violating US laws on unregistered securities.
To understand the matter, it is necessary to know that on the decentralised exchange in question, anyone can create and trade a token in a trustless manner, i.e. without anyone having to approve the transaction.
Many times, those who create a new cryptocurrency have a plan to scam the buyer by suddenly removing all liquidity on the DEX or selling large batches of tokens on the market to make a profit.
The New York court expressed its opinion on the matter by agreeing with the defence and dismissing the case before it could go to trial.
In fact, it can be read from the papers that it is not Hayden Adams and his Uniswap protocol who are the real defendants in the case, but the issuers of the “scam tokens” who defrauded American investors.
The decentralised nature of the protocol makes it difficult to identify these issuers, especially given the fact that there is still no regulation in place that can go against law enforcement and facilitate the recognition and arrest of those responsible for the scams.
In this regard, citing the absence of relevant regulation, the Court concluded that investors’ concerns “are better addressed to Congress than to this Court”
Stating at the same time that Bitcoin and Ethereum represent two commodities, the judge refused to “extend federal securities laws to cover the alleged conduct.”
The story sounds very similar to the Tornado Cash case, where users outside the owners of the open source code used the protocol for illicit purposes, laundering money through the decentralised mixer.
In that case, the founders of Tornado Cash, unlike Hayden Adams, were arrested because they were held responsible for aiding the passage of dirty money through their platform without putting in place any preventive measures, even though they were aware of the illegalities that were taking place.
The founder of Uniswap himself described the final decisions of his trial as a great victory for DeFi, forgetting, however, that similar cases were closed in a totally different way.
There is still a long way to go before there is a homogenous interpretation by the courts on cases relating to wrongdoing on decentralised open source platforms.
Source: https://en.cryptonomist.ch/2023/09/01/bitcoin-ethereum-classified-commodities-ny-court/