eToro USA LLC has agreed to pay $1.5 million to settle charges put forth by the Securities and Exchange Commission, which claimed the social trading platform operated an unregistered broker and unregistered clearing agency in connection with its trading platform that facilitated buying and selling certain crypto assets as securities.
As part of the settlement, eToro agreed to “cease and desist from violating the applicable federal securities laws and will make only a limited set of crypto assets available for trading.”
“This resolution offers a pathway for other crypto intermediaries”
The SEC implicitly suggests other crypto trading platforms do the same as eToro and remove token securities from their offering in the case they are not registered with the SEC.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, said: “By removing tokens offered as investment contracts from its platform, eToro has chosen to come into compliance and operate within our established regulatory framework. This resolution not only enhances investor protection, but also offers a pathway for other crypto intermediaries. The $1.5 million penalty reflects eToro’s agreement to cease violating applicable federal securities laws as it continues its U.S. operations.”
According to the SEC, eToro operated as a broker and clearing agency since 2020 by providing U.S. customers the ability, through its online trading platform, to trade crypto assets being offered and sold as securities. eToro, however, did not comply with the registration provisions of the federal securities laws.
eToro now only offers Bitcoin, Bitcoin Cash, and Ether for US customers
From now on, the only crypto assets that U.S. customers can trade on the company’s platform will be Bitcoin, Bitcoin Cash, and Ether. eToro publicly announced that it will provide its customers with the functionality to sell all other crypto assets for only 180 days after the issuance of the SEC’s order.
Greenlighting Bitcoin, Bitcoin Cash, and Ether comes as a win for those looking for regulatory clarity in the United States. Now it becomes clear that trading platforms can offer these three crypto assets to retail users without being registered with the SEC as a securities broker.
This move highlights ongoing issues between crypto companies and the SEC, particularly regarding the regulatory status of digital assets. The lack of clear guidelines has resulted in numerous lawsuits, with the SEC targeting several high-profile exchanges and cryptocurrencies.
One of the most notable cases, SEC v. Ripple Labs, revolved around whether XRP was a security. The lawsuit’s outcome left the legal status of many crypto assets in a grey area, with the court ruling that XRP sales to institutional investors violated securities laws, but retail sales did not.
The regulatory ambiguity extends back to the 2018 Hinman speech, in which then-SEC Director William Hinman stated that Ether, despite being launched through an initial coin offering (ICO), was not considered a security. This speech gave hope to many crypto projects but failed to provide a comprehensive framework, with the SEC later hinting that it might still pursue enforcement actions against certain issuers and promoters of digital assets.
