Well, can’t say I’m shocked to see these charges levied against the now bankrupt Genesis and Winklevoss owned Gemini. But, let’s cut to the chase:
- What is an unregistered security?
- What does it mean for Gemini and Genesis?
- What does it mean for your bags?
What is an Unregistered Security?
The unregistered part is easy — this just means a particular security isn’t registered with the SEC. The SEC wants to know what financial products you’re selling at all times to “protect investors” ::throwsupinmouth::. Which brings the more complicated question, well then, what is a security?
The SEC defines a security as stocks, bonds, puts, calls and a long series of other traditional financial instruments, that are fungible and negotiable, which hold some sort of monetary value (the full SEC definition can be seen here).
The next question is obvious, are cryptocurrencies securities? Traditional cryptocurrencies, such as BTC and ETH, are currently widely considered to be commodities. However, it can certainly be argued that some NFT projects, DeFi protocols and other financial constructs in crypto may be securities.
This isn’t the first time the SEC has tried to start classifying crypto products as securities, and it certainly won’t be the last. By asserting that Gemini/Genesis were listing unregistered securities, the SEC is just adding to their case that they think crypto should be strictly regulated.
What Does it Mean for Gemini and Genesis
Uhh, not good. First off, it means more legal fees to defend the charges for two companies that are already obviously struggling financially. Secondly, and what I would be more worried about if I was a Winklevoss (beside what color my next yacht is going to be), is the felony penalty for selling unregistered securities according to the The Securities Act of 1933–which is .. drum role please .. a whopping 5 year federal prison term.
That’s right, it doesn’t just mean those crypto firms will need to convert some magical internet beans into fiat to pay a fine to our over bloated government, they could face legit jail time. Now, I don’t think that’s likely for a whole slog of reasons (championed by the fact that crypto as a security is still a gray area), but it is on the table.
What Does it Mean for Your Bags?
Ehh, not much at the moment, but it’s just one more occasion where the boogey man wants to cement his presence. The SEC is pounding at the door with their security classifications as applied to crypto, and they’re coming in with a full on battering ram at this point.
The more cases they bring like this, the more times it gets in front of a judge, the more opportunity there is for crypto to see security classification. That would spell disaster for almost every bootstrapped DeFi/NFT founding team and cause a regulatory scramble like we haven’t seen in crypto, ever.
Keep your eyes out for more and more of these types of assertions from the SEC.