The Attorney General’s office in New York filed a lawsuit against KuCoin for violating the commodities and securities laws.
There were some startling claims made by Attorney General Letitia James in the complaint against the crypto exchange.
The lawsuit
The lawsuit states that TerraUSD (UST) and Terra (LUNA) are securities, something that the Securities and Exchange Commission (SEC) has already asserted in the past.
It also stated that the second largest crypto by market cap, Ethereum (ETH), is also a security. According to the petition, Ether is also a speculative asset that depends on third-party developers’ efforts to generate profits.
The KuCoin exchange has been targeted by the lawsuit for false representation as an exchange while operating as a commodities and securities broker-dealer.
The lawsuit aims to block KuCoin’s access in New York by forcing the exchange to geo-fence its website by GPS location and IP addresses.
ETH
According to the lawsuit, it is security since people can generate financial rewards by holding ETH. This is after Ethereum transferred to the proof-of-stake (PoS) algorithm.
The PoS transition means users can now get staking rewards on their ETH holdings. The lawsuit’s timing is interesting, as regulators have been focusing on staking services of late.
The SEC it had fined Kraken in the previous month over its staking product violating the securities law.
Gary Gensler, the chairman of the SEC, has also hinted that ETH could be the agency’s latest target, as he has repeatedly stated that Bitcoin is the only crypto asset that is a commodity.
Regulatory crackdown
The move from the New York Attorney General is the latest one in the crackdown against the crypto industry in the United States.
Of late, there has been an increasing number of enforcement actions taken by the SEC, and the anti-crypto rhetoric from lawmakers and politicians has also gained traction after FTX’s downfall.
The state of New York had also filed a lawsuit last month against CoinEx, another crypto exchange, for not registering itself as a commodities and securities broker-dealer.
