SEC sues Bittrex, claiming it is a securities

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SEC sues Bittrex, claiming it is a securities

Decentralization does not exempt a protocol or token from SEC scrutiny, the regulator said in a lawsuit filed Monday against Bittrex.

SEC Chairman Gary Gensler is expected to double down on that point during an appearance to a Congressional subcommittee on Tuesday, according to a copy of his remarks.

The SEC said Bittrex sold unregistered securities. The securities were allegedly worth millions, including DASH, one of the hundreds largest tokens by market capitalization.

The SEC also claimed Algorand's ALGO, one of the 50-largest tokens by market capitalization, is a security measure.

The SEC alleges that the Algorand Foundation and Algorand Inc. both support the Algorand blockchain. People who purchased ALGO could'reasonably believe' they would benefit from both companies' effort to grow the blockchain, growth that would, in turn, drive demand for ALGO.

Algorand is a 'common enterprise' whose investors can expect profits based on others' efforts, according to the SEC. The key factor that determines whether a particular asset is a secure asset, according to US law, is the expectation of profit based on other people's work.

It's clear the SEC thinks the foundation can be the 'others' upon which investors are relying for a reasonable expectation of profits,' said Zach Rosenberg, principal at Degen Legal.

Crypto industry uses the protocol-and-foundation arrangement. The tokenholders often receive support from a foundation or a company run by the protocols' founder team if they become immutable protocols and protocols.

Gensler has previously said that most crypto tokens are securities. He plans to testify before the House Committee on Financial Services Tuesday, according to a copy of his prepared testimony, which is available on the committee's website.

Crypto industry participants say the SEC has not been acting in good faith, and stress that the SEC has declined to provide a viable path to registration or to list the tokens it believes to be securities.

Two weeks ago, Bittrex announced it would exit the U.S. market by April 30, citing the current U.S. regulatory and economic environment.