CFTC Commissioner Caroline Pham said on March 29 that her agency’s charges against KuCoin may constitute a breach of the SEC’s duties.
Pham acknowledged the CFTC case as an “aggressive enforcement action” and commended the Division of Enforcement for this step. However, she expressed concern about some of the allegations.
Distinction needed
According to Pham, the complaint suggests that fund shares held by investors may themselves be a form of leveraged trading.
She said this interpretation does not distinguish between investments in funds, which are commonly considered a security under the jurisdiction of the SEC, and a fund’s trading activities, which are under the jurisdiction of the CFTC.
Stressing the need for a distinction, she wrote:
“Owning stocks is not the same as trading derivatives.”
Pham added that the CFTC’s handling of the issue “could constitute an infringement on the authority of the SEC,” undermining investor protection laws and disrupting the foundations of the securities markets.
Some commentators previously noted that the case names Bitcoin (BTC), Ethereum (ETH), and Litecoin (LTC) as commodities, potentially excluding these tokens from the SEC’s jurisdiction. Pham’s statements do not address this exact issue.
KuCoin will be charged this week
The CFTC filed civil charges against KuCoin and related companies on March 26 on allegations of operating an illegal digital asset derivatives exchange and, more broadly, violating the Commodity Exchange Act (CEA) by not registering with the CFTC.
The US Department of Justice has also filed criminal charges against KuCoin and two of its founders, including but not limited to alleged violations of anti-money laundering laws.
KuCoin responded to the allegations by assuring users that the funds would remain safe and claiming that it complied with various local laws. The company said its lawyers are investigating the claims.
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