The Securities and Exchange Commission has been waging a campaign to regulate cryptocurrencies since 2017, arguing it has the authority to oversee many digital coins and the platforms that trade them, the Wall Street Journal reported. The SEC can only regulate digital coins that are classified as securities, a category that includes assets such as stocks and bonds. SEC Chair Gary Gensler has said that most crypto tokens fall within that category. This means that many were distributed illegally, because securities can only be sold to the public if they are registered with the SEC and the issuers provide financial and risk disclosures. Selling securities to the broader public, including crypto tokens, without registration makes the issuer liable for violating investor-protection laws. Regulators first warned crypto companies that many cryptocurrencies looked like securities in 2017, when the SEC outlined how it would use a Supreme Court test to define them. Since then, the SEC has labeled almost 80 crypto tokens as securities, including many whose sale involved some kind of fraud. That is a small percentage of the total number of cryptocurrencies that trade in the U.S., showing how little of the industry has been addressed in six years of enforcement. The SEC says each token requires its own in-depth legal analysis.
