New York Attorney General Letitia James referred to Ethereum’s native ETH token and other cryptocurrencies as “securities and commodities” in a statement issued in relation to her lawsuit against crypto exchange KuCoin.
In the statement, Attorney General James said KuCoin has facilitated trading in a number of cryptocurrencies to residents in New York, where the platform is not registered as required by law.
“The Office of the Attorney General (OAG) was able to buy and sell cryptocurrencies on KuCoin in New York even though the company is not registered in the state,” she said.
She added about KuCoin that the platform allows traders, including those in New York State, to “buy and sell popular virtual currencies, including ETH, LUNA, and TerraUSD (UST), which are securities and commodities.”
The statement from the Attorney General is surprising given that it is likely the first time a regulatory official in the US have referred to ETH specifically as potentially being a security for regulatory purposes.
If the asset was to officially receive such a classification in the US, it is expected to have far-reaching implications for the crypto industry. The scenario has long been feared in Ethereum circles, although it remains unclear exactly how it would affect the Ethereum project and the price of ETH.
The Ethereum Foundation, which funds much of the development that happens on the Ethereum network, is not based in the US, but instead registered in Switzerland. Additionally, much of the trading in ETH and other altcoins happens on offshore exchanges that are not regulated in the US.
In the past, Rostin Behnam, chair of the Commodity Futures Trading Commission (CFTC), has said that bitcoin (BTC) is the only cryptocurrency that can be considered a commodity for regulatory purposes.
Similarly, Gary Gensler, the Chair of the Securities and Exchange Commission (SEC), have in the past called bitcoin a commodity, without saying anything about how he sees other cryptocurrencies.
Rein in “shadowy” crypto companies
In the statement on the action taken against KuCoin, Attorney General James also said that the action is part of a larger effort to “rein in shadowy cryptocurrency companies and bring order to the industry.”
“One by one my office is taking action against cryptocurrency companies that are brazenly disregarding our laws and putting investors at risk,” she said, while adding:
“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.”
The Attorney General is now seeking a court order that would stop KuCoin from calling itself an “exchange,” and that prevents the company from operating in New York via geo-blocking based on the “IP addresses and GPS location” of users.