SEC Penalty Forces eToro to Cut Most Crypto Assets

• eToro limits U.S. crypto trading to Bitcoin, Bitcoin Cash, and Ether post-settlement.
• SEC settlement pushes eToro toward compliance with U.S. federal securities laws.
• eToro’s case sets precedent for crypto platforms navigating U.S. regulatory framework.

eToro USA LLC has agreed to pay a $1.5 million penalty to the Securities and Exchange Commission (SEC) to resolve charges related to operating as an unregistered broker and clearing agency.

The SEC found that eToro’s platform facilitated trading in crypto assets considered securities without the necessary federal registrations. As a result, the company will cease trading in most crypto assets for its U.S. customers, only allowing Bitcoin, Bitcoin Cash, and Ether to be traded on its platform moving forward.

Unregistered Operations and Impact

Since 2020, eToro has been providing U.S. customers with the ability to buy and sell various crypto assets. However, the SEC determined that the company was operating as both a broker and a clearing agency without the required registrations. This violation prompted the charges and subsequent settlement.

In response, eToro has accepted a cease-and-desist order and will limit crypto trading to the three aforementioned assets. U.S. customers will have 180 days to sell any other crypto assets on the platform. Any remaining assets that can’t be returned to customers must be liquidated within 187 days, with the proceeds returned to their respective owners.

Regulatory Clarity and Investor Protection

The SEC’s order focuses on the federal securities laws for all trading platforms dealing with cryptocurrencies based in the United States. eToro’s compliance with the order signals its commitment to adhere to legal requirements and prioritizing investor protection. In addition, this settlement creates a roadmap for other crypto-intermediaries in the challenging legal structure.

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According to Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, such actions show how the SEC is determined to enforce securities laws, pointing out that eToro has agreed to stop the sale of some crypto assets. The resolution also provides a blueprint for other platforms willing to continue their operations within the legal realms and keep functioning in the U. S.

In agreeing to the settlement, eToro neither admitted nor denied the SEC’s findings. However, the company’s decision to limit its offerings signals its intent to align with U.S. regulations, potentially setting a precedent for other crypto firms. The case was handled by the SEC’s Crypto Assets and Cyber Unit, with a team led by Mark R. Sylvester and Jorge G. Tenreiro.