Justice Department scores a win in 'first-ever" crypto insider trading case, which the SEC is using as a test case to classify cryptocurrencies as securities.
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A man has been sentenced to 10 months in prison for using his brother's advance knowledge of cryptocurrencies that were about to be listed on Coinbase to make nearly $900,000.
While not as big as it once was, the "Coinbase effect" generally still sees new tokens get a substantial price bump after being listed on the top U.S. spot crypto exchange.
"At a time when the cryptocurrency markets have been plagued by fear, uncertainty, and doubt, insider trading creates the impression that everything is rigged and that only people with secret advantages can make a real buck. Today's sentence makes clear that the cryptocurrency markets are not lawless. There are real consequences to illegal insider trading, wherever and whenever it occurs."
That's not the only precedent set by the case, however.
The Justice Department's case was filed at the same time as a civil suit by the Securities and Exchange Commission and relied on long arguments — 39 pages' worth in the court filing — as to why the nine cryptocurrencies in question qualified were more accurately "cryptoasset securities" under the SEC's jurisdiction.
That's been a point of contention between the crypto industry and the SEC, with the former saying most cryptocurrencies should be seen as "utility tokens" properly classified as commodities.
Speaking at a Washington Post conference in June, Sen. Kristin Gillibrand of New York said that under bipartisan legislation she has co-authored with Wyoming Sen. Cynthia Lummis, the CFTC would have the lion's share of crypto oversight by market capitalization — Bitcoin and Ether. But she added:
"The majority of the digital assets ... have characteristics of securities that will require the SEC's disclosure capabilities ... The SEC's role in this is absolutely critical."