Crypto Vs SEC: Are ICOs Securities? Top Legal Minds Lock Horns Over Laws

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The Internet is buzzing as Marc Fagel, a respected retired securities lawyer, and Bill Morgan, a known digital asset enthusiast, and lawyer, go head-to-head in a debate around the legal status of cryptocurrencies.

What were their comments? Who is the crypto community siding with? Let’s explore. 

Clash of Perspectives

The dispute kicked off with Fagel suggesting that digital assets, even if offered abroad, should undergo a security status check if traded in the United States.

Morgan immediately countered, asserting that, unlike stocks, cryptocurrencies are not inherently recognized as securities under US or Australian law. He insisted that a digital coin can only be deemed a security if it’s considered an investment contract in the US, or part of a managed investment scheme in Australia.

An overseas Initial Coin Offering (ICO) couldn’t be deemed an investment contract under US law, as it is outside the purview of the Securities Act. He also added that when such coins are traded on secondary markets, they don’t automatically transform into securities.

Debate Heats Up

In response, Fagel contested Morgan’s logic, equating foreign-issued stocks traded in the US to digital assets. He argued that if a foreign-issued asset satisfies the definition of a security under the US law, meaning it meets the Howey Test, it should be subject to US securities law when traded in the US.

In his final response, Morgan asked who would register the foreign-issued assets when they are first sold in the US. He also queried why they would be treated as securities if no decision had ever declared the ICO to be an investment contract.

As the debate goes on, here are some questions for you to ponder upon. If a cryptocurrency doesn’t fall under the securities category by statutory definition, should it still be regulated as one? Should an ICO conducted overseas be subject to the laws of the country in which it is later traded? Who bears the responsibility for ensuring compliance?

Also read – Crypto Market Face Make-or-Break Week: 5 Events Will Decide Fate of Bitcoin and Altcoins