Laney Seward

SEC vs Crypto: Major Legal Battles That Shaped the Industry

The clash between the U.S. Securities and Exchange Commission (SEC) and the cryptocurrency industry has defined much of the regulatory landscape for digital assets. For over a decade, the SEC has argued that many crypto projects are skirting securities laws, while the crypto industry claims outdated rules unfairly target it. The result has been a series of legal showdowns that have shaped how crypto is regulated, built, and traded in the U.S. An Orlando lawyer with experience in securities and fintech law may closely watch these developments as the outcomes continue to impact compliance strategies nationwide.

The DAO Report (2017): The Starting Gun

Before the courts got involved, the SEC issued a landmark report 2017 on an Ethereum-based project called The DAO. This decentralized venture capital fund raised $150 million in ether. The SEC didn’t file a lawsuit, but the report was a clear warning: digital tokens that behave like investment contracts could be treated as securities.

The agency leaned on the Howey Test—a legal standard from a 1946 Supreme Court case—to determine whether something qualifies as a security. According to the test, if people invest money in a common enterprise expecting profits from the efforts of others, it’s a security. The SEC concluded that the DAO tokens met those criteria. This report set the tone for years of enforcement.

SEC v. Kik Interactive (2020): First Major Win

Kik, the company behind a popular messaging app, raised $100 million in 2017 by selling its Kin tokens. 2019, the SEC sued, arguing that the sale was an unregistered securities offering. Kik claimed Kin was a currency, not a security.

In 2020, the court sided with the SEC. It found that Kik’s public token sale and marketing of the tokens fit the Howey Test. This case gave the SEC confidence to pursue similar cases and signalled to startups that token launches carried legal risks.

SEC v. Ripple Labs (2020–2023): A Partial Blow

Ripple’s case has been one of the most closely watched in crypto history. In December 2020, the SEC sued Ripple for selling XRP as an unregistered security. In 2023, the court ruled that Ripple broke the law in sales to institutional investors but not to retail buyers on exchanges. The main issue was whether buyers expected profits from Ripple’s efforts.

This nuanced decision undermined the SEC’s broad stance that most tokens are securities. While the case didn’t fully exonerate Ripple, it showed that context matters—and not every token sale fits neatly into the Howey framework.

SEC v. LBRY (2021–2023): A Loss for Crypto

LBRY, a decentralized content platform, was sued for selling its LBC tokens without registering them. In 2022, a judge ruled that LBRY violated securities laws—even though it didn’t hold a formal token sale. The court noted that the company used token sales to fund operations, and buyers reasonably expected profit.

This decision was a setback for crypto. Unlike the Ripple ruling, it didn’t carve out exceptions for retail sales. LBRY ultimately shut down in 2023 after losing its appeal.

SEC v. Coinbase and Binance (2023–ongoing): The Big Guns

In mid-2023, the SEC sued Coinbase and Binance, the world’s two largest crypto exchanges. The agency accused both of operating unregistered securities exchanges and offering tokens that qualify as securities.

These cases aim to answer a bigger question: Do secondary market trades of crypto tokens fall under SEC oversight? If the SEC wins, it could force exchanges to delist dozens of tokens or register as securities platforms—an expensive and uncertain process. So far, both companies are fighting back in court, and no final rulings have been issued. However, the cases are expected to set a precedent.

Beyond the Courts: Regulatory Gridlock

One major issue is that the U.S. still doesn’t have clear legislation defining how crypto should be regulated. The SEC has taken the lead through enforcement, while the Commodity Futures Trading Commission (CFTC) claims authority over crypto commodities like bitcoin.

Congress has introduced several crypto bills, but none have passed into law. This leaves startups and investors guessing what’s allowed and what isn’t. Until a legislative framework is established, the SEC will likely continue regulating through litigation.

The SEC’s battles with the crypto industry have clarified some legal boundaries but left others murky. The courts have shown they’re willing to challenge the SEC’s broad interpretations, but they’ve also upheld the agency’s authority in key areas.

What’s clear is that the crypto industry can’t operate in a legal vacuum. Whether through Congress or the courts, clear rules are coming—eventually. For now, the SEC remains a powerful force, shaping the crypto space one lawsuit at a time.

Posted by Laney Seward in Cryptocurrency

Opportunities and Risks of Cryptocurrencies

Cryptocurrencies

 

Cryptocurrencies, such as Bitcoins, cannot be touched, because they are only available in digital form. Often they are based on the so-called blockchain technology. In payment transactions, they still do not play a role of their own but have so far tended to serve as high-risk speculative objects. What do speculators have to consider?

What are cryptocurrencies?

The idea of cryptocurrencies or cryptocurrency is based on the desire to create an electronic payment system without the participation of banks and states. These non-governmental, virtual currencies work with limited amounts of money, which are digitally formed with the help of computer networks in mathematical procedures. Whether these are actually currencies or money is controversial because a central bank will not issue them. In common parlance, however, these terms have prevailed, which is why they are also used here.

Bitcoin (BTC) is the most well-known cryptocurrency. But there are other virtual currencies such as Ethereum (ETH), Ripple (XRP) and Litecoin (LTC), etc. Their exchange rate development can be tracked online.

Excursus Bitcoin

Bitcoin was the first cryptocurrency. It was developed in 2008 by unknown programmers under the pseudonym “Satoshi Nakamoto” and published in a white paper. The aim was to create a system for electronic payment that does not require banks or other intermediaries. Instead, it relied on self-management by users by combining the computing power of a large number of computers (peer-to-peer network) in order to publicly record and verify each transaction in a complex calculation procedure (mining).

Anyone who has an internet connection can theoretically buy, sell, mine, or simply pay for Bitcoins. Bitcoins can be bought on certain exchanges at the then current price or purchased on online trading platforms by other users.

Unlike in the past, this payment system is no longer based on trust in credit institutions as payment service providers but is based exclusively on mathematical rules. Payers and payees verify their transactions using so-called public and private keys, their respective identities do not play a role. Due to its pseudonymization, Bitcoin came under criticism early on. Criminals use it for illegal transactions. Nevertheless, the value of a Bitcoin has developed since its introduction in 2009 from 0.08 cents (dollars) to over 60,000 dollars in the meantime and to about 23,000 dollars by August 2022. Extreme fluctuations in value will continue to affect Bitcoin in the future.

What is the significance of blockchain?

The blockchain is a decentralized, public database. With blockchain technology, different data sets are linked together in chronological order. Using the example of cryptocurrency, you can imagine it like this:

A transaction with a virtual currency is summarized in a record. An algorithm (hash function) is used to shorten this complex data set to a smaller string. Hash stands for “chopping”. The result of this calculation is mapped in a checksum, the so-called hash value, and linked to hash values from other transactions in large data blocks. Thus, a blockchain is ultimately a long chain of data blocks. Any modification of a data block would change the logical relationship to the subsequent data blocks, which the system does not allow. Once transactions have been made, they are therefore irreversible. In this respect, it can be said that the blockchain cannot be manipulated.

However, this does not apply to the interfaces, the so-called wallets. If you want to use crypto money, you need this digital wallet to store the virtual money. If such a wallet is lost or hacked, crypto money can be lost (total loss). If you use wallets, you should inform yourself about the different security options.

 

ALSO READ: The People Who Started Bitcoin Trading

 

Trading cryptocurrencies

With your wallet, you can then start trading on crypto exchanges yourself. Since you can easily do something wrong, you should inform yourself well. Some crypto exchanges also offer integrated wallets for trading and custody, which can be convenient. To do this, you have to register there and be prepared to transfer money to foreign accounts.

Crypto trading via the smartphone app is also possible. These are designed to be user-friendly and provide access to the largest crypto assets.

The neobrokers also make it comfortable. Similar to the app solution, you only have to open a depot there and you can get started immediately. Crypto ETPs (Exchange Traded Products) are also increasingly being offered there. Here you do not invest directly, but via bonds that replicate the performance of the respective crypto asset. This entails higher costs but is very easy for investors to handle.

Opportunities and risks using the example of Bitcoin from the consumer’s point of view

  • Flexible but slow: A transfer of Bitcoins takes between 10 minutes worldwide. This is many times slower than in classic digital payment transactions. Cryptocurrency works independently of national currencies. Exchange rates are eliminated, and anywhere in the world can theoretically be paid with Bitcoin. In fact, however, the payment options both on the Internet and even more so in stationary retail in Germany are still limited.
  • The secure procedure through transparency and irreversible payments: Blockchain-based cryptocurrencies have so far scored with their non-manipulation and the fact that all transactions take place publicly. However, this also means that payments once made can no longer be reversed.
  • No value stability: Even if Bitcoins are sometimes touted as a store of value (digital gold), crypto money is subject to very strong fluctuations in value and has not yet proven to be a safe haven in times of crisis. As an investment, cryptocurrencies are therefore to be classified as highly speculative. They are not at all suitable for retirement provisions.
  • No cost stability: Fluctuations are also common in transaction costs. For example, a Bitcoin transfer in March 2021 cost only 0.30 USD, while in December 2017 you still had to pay over 55 USD for it. In addition, transaction costs can rise permanently the faster the energy demand for global cryptocurrency mining develops. Currently, the energy consumption for Bitcoin mining alone is comparable to that of the Netherlands, and the trend is rising.
  • High energy consumption/Low sustainability: Calculating Bitcoins is energy-intensive. In 2021, the energy consumption for this was as high as that of Ukraine. And the trend is rising. This can certainly be seen as a legitimate price for the benefits, say the proponents. Thus, many people, especially in poorer countries, benefit from crypto money’s payment and value storage possibilities. However, the energy used up comes mainly from dirty power generation and hardly from sustainable sources, the critics reply.
  • Uncertain market: Which provider, which currency, which system will prevail? These questions cannot be answered at this time.
  • Technical challenges: What if something goes wrong when dealing with cryptocurrency? For example, the loss of the private key or the wallet leads to the fact that you can no longer get to your Bitcoins. Then there is no bank, complaints office, or public institution to turn to. The use of cryptocurrency makes it necessary to familiarize oneself with the rules of the game that this technology entails.
  • There are also dubious trading platforms on the Internet that try to lure investors with lucrative investment transactions, e.g. in cryptocurrencies. You can read more about this in the article “How to recognize dubious online trading platforms”.

Regulation of cryptocurrencies

The German Financial Supervisory Authority (BaFin) classifies crypto money as a so-called “unit of account” within the meaning of the German Banking Act (KWG). In other words, as a unit of value that is not denominated in legal tender and is comparable to foreign currency.

Do you need permission from the financial supervisory authority for the business with cryptocurrencies? It depends. Possession, use, purchase, sale, and mining of cryptocurrencies are basically not subject to permission. Crypto money is used exclusively as a substitute for cash or cashless payment. As long as users comply with this, they are no case for financial supervision. But this is a fine line. Anyone who publicly advertises that he buys or sells cryptocurrencies is engaged in proprietary trading subject to authorization. Accordingly, crypto money trading platforms and mining pools typically require a BaFin license.

Posted by Laney Seward in Cryptocurrency

The People Who Started Bitcoin Trading

Bitcoin Trading

 

More and more investors speculate about Bitcoin. Interest in the best-known cryptocurrency is also growing among major investors such as pension funds. But what actually happens behind the scenes?

For the most important cryptocurrency, 2021 is already an extremely turbulent year. In early January, Bitcoin – invented in 2009 – reached a new record high of more than $41,000. Since then, the digital currency, which was originally intended as a means of payment, has temporarily lost a lot of value again – with price losses of up to 20 percent within a few hours. Finally, it went back in the other direction. For example, a simple tweet by Tesla CEO Elon Musk and discussions by private investors in Internet forums were enough to drive the price up by 20 percent at the end of last week. This rollercoaster ride repeatedly brings the largest digital currency into the headlines with a market share of over 60 percent. Industry experts have been reporting a growing interest in Bitcoin for some time: In addition to private individuals, large institutional investors such as banks, insurance groups or fund companies are now also entering the market.

First “crypto fund” in Germany

Patrick Karb, Managing Director of Frankfurt-based Hauck & Aufhäuser Innovative Capital GmbH, also notes this. “We see great demand from investors, especially on the institutional side,” he says in an interview with tagesschau.de. For this reason, the private bank Hauck & Aufhäuser founded the subsidiary in September and launched the first fund in the German financial industry at the beginning of the year, which consists exclusively of digital assets such as Bitcoin. The bank is cooperating with the Berlin fintech Kapilendo, which takes on the role of crypto custodian – i.e. the one who manages and secures the extensive calculation codes that make up the e-currency.

The demand from customers, from small semi-professional investors to pension funds, pension funds, and other investment funds to MDAX corporations, is enormous. This is also due to the recent development of Bitcoin. “The topic was also widely disseminated in the media so that cryptocurrencies became more popular not only in the private but also in the institutional sector,” says Karb. Especially in the Corona crisis, alternatives are being sought – Bitcoin also serves as a refuge currency, so to speak

Predominantly men invest in Bitcoin

Currently, the proportion of institutional investors worldwide is still very low. “Of the current about 700 billion US dollars in Bitcoin, about one percent is institutional money,” Jeff Currie, head of commodities at the US bank Goldman Sachs, recently told CNBC. The majority is traded by private individuals. Among these crypto investors, according to a recent study of around 100,000 investor profiles of a large German online bank, 90 percent are men. Other typical features are a comparatively high income and a certain affinity for technology, scientists from the Frankfurt Leibniz Institute for Financial Market Research found in the study. But how does this trade actually work

Hardly any regulation

“Before we trade, we monitor the prices on the platforms Coinmarketcap or Bitstamp, for example,” explains fund manager Karb. The opening and closing of the foreign traditional stock exchanges are also relevant at the time of purchase. “We are already seeing a correlation between the crypto market and the traditional market. In many cases, the overall economic situation also affects Bitcoin,” says the banker. For example, he has also benefited from the dispute over the speculation of the Gamestop share. Especially on weekends, however, there are often less fluctuating prices. The laws of Bitcoin development are complicated overall and not always rational.

The bank does not trade directly via special crypto exchanges and platforms, because these would for the most part not have sufficient admission in Germany, explains Karb. “We wanted to avoid getting the bitcoins from sources that we can’t uniquely identify.” On the blockchain, the technology behind Bitcoin, and a kind of digital logbook, the sources of origin are unknown.

That is why Hauck & Aufhäuser acted as a broker to the Frankfurt Bankhaus Scheich, which also has an approved crypto custodian. This at least reduces the risk of money laundering, says Karb. “When we order a transaction, Kapilendo verifies it, approves it, and transmits the order. Bankhaus Scheich then stocks up on the crypto market via various exchangeswithCoinbase or Kraken and makes the Bitcoins available to us in the fund’s wallet.”

Banks can act as brokers

The software for Bankhaus Scheich or Münchener Bankhaus von der Heydt, which plans to launch a crypto trading platform for institutional investors at the end of the first quarter, is being developed by the Frankfurt-based company Blocksize Capital. It ensures that the banks can act as brokers. The technology bundles the liquidity of 50 crypto exchanges, as Managing Director Christian Labetzsch reports. Within 100 milliseconds, the best possible price is recognized and the transaction is implemented immediately.

Normally, unlike the stock market, there is no middleman in crypto trading like a bank or a broker, Leon Berghoff, a graduate of the Frankfurt School of Finance & Management, explains to tagesschau.de. Exceptions in Germany are the Stuttgart Stock Exchange with the BISON app and the BSDEX (Börse Stuttgart Digital Exchange) or the Berlin crypto bank Bitwala.In most cases, however, investors set up an account directly with the stock exchange, which has both advantages and disadvantages. “Trading is much more transparent at first: You can use the trading data to see exactly what is happening on the crypto exchange,” says Berghoff. Another advantage lies in the relatively low transaction costs.

 

ALSO READ: Does Real Estate Accepts Crypto As Paymen

 

One risk, on the other hand, is custody. In regular trading, the cryptocurrency must also be stored on the stock exchange. “It can happen that stock exchanges are at the mercy of hacker attacks and the money disappears,” warns Berghoff. However, the more well-known exchanges are now more professional and better protected. The lack of regulation and state security can also become a problem for private investors.

How does a Bitcoin get to the buyer?

Leon Berghoff is a so-called quantitative trader at the startup Sixtant – and thus partly responsible for the fact that investors can buy Bitcoins at all. The company is a global high-frequency trader in the crypto sector. As a rule, such traders have contracts with crypto exchanges such as FTX, Binance, Bitstamp, or Bitso and ensure that there are always enough Bitcoins there. In return, they receive a fee.”If an investor wants to buy or sell a cryptocurrency, we are ready to be the counterparty to that trade at any time,” Berghoff explains. Since these transactions take place very often, high-frequency traders execute several trades per second. This is intended to keep the difference between the purchase and sale price low. Sixtant either borrows the coins from the respective exchange or buys them on the open market.

So that these companies, known in the financial world as “market makers”, are subsequently not exposed to the price risk due to the extreme fluctuations of Bitcoin, they also hedge against price losses within milliseconds. “We are always on the wrong side of the trade,” says Berghoff. If the market goes up, he has to sell Bitcoin – the opposite of successful investing. “When we buy bitcoins from someone, we try to sell the currency again as quickly as possible or buy a derivative with which we shorten the bitcoin.” By betting on falling prices as a counter-transaction, the risk is minimized.

Predictions by algorithms

In addition, many companies in the scene also have a department that makes profits through its own trading on the free market. The aim is to predict certain developments of Bitcoin minutes or seconds in advance, as Berghoff explains. In quantitative trading, this works automatically. As a dealer, he is employed around the clock. “Unlike a stock trader, a day as a crypto trader goes 24 hours, as the crypto exchanges are open at all times – 365 days a year,” says the expert. A lot can also happen overnight because cryptocurrencies fluctuate greatly. “This means that I first check the system and see how the algorithms acted and whether there were any technical problems,” says Berghoff. The Sixtant employees are spread all over the world to examine the system and the markets at all times.

“More screens than I would admit”

Otherwise, algorithmic trading has a lot to do with programming codes. “We get historical data for individual cryptocurrencies on certain exchanges: For example, I look at the price data of Bitcoin per minute over the past three years and try to find anomalies in it,” explains Berghoff. On this basis, he finally developed an algorithm that takes this effect into account in trading: “If it has worked in the past, we hope that it will also work in real-time.”Comparable, for example, is the so-called “Monday effect” from stock trading.

This states that Monday is traditionally the weakest day of the week on the stock market. In crypto trading, however, this is much more complex, according to Berghoff. By exploiting anomalies, attempts are made to make profits in proprietary trading. In addition, a high-frequency trader must check the codes and technical relationships on a trader’s day and correct possible errors. But he has, says Berghoff, “more screens at my workplace than I would admit.”

Posted by Laney Seward in Cryptocurrency