What does the SEC’s warning shot at crypto mean?

Yesterday was a big day for the crypto industry. A former Coinbase product manager was arrested alongside his brother and a friend, and charged with running a cryptocurrency insider trading scheme by the U.S. Department of Justice (DOJ).

At the same time, the U.S. Securities and Exchange Commission (SEC) filed a separate document on the case, designating a number of the assets traded by the group as cryptocurrency securities, a classification that raised eyebrows.

“I think it’s odd the SEC would sue three individuals for violating securities law, arguing that at least nine of the 25 digital assets they bought and sold as part of the alleged scheme qualify as securities, but not pursue the exchange that listed these digital assets,” Hailey Lennon, partner at law firm Anderson Kill, told TechCrunch.

The classification of some crypto assets as securities may have major implications for the digital asset industry, which has largely benefited from years of little to no regulatory oversight.

While crypto has been somewhat free from regulation due to its de novo products, it is seeing issues similar to what other financial markets have seen.

Insider trading has been around for long before cryptocurrency, Michael Fasanello, chief compliance officer at LVL, told TechCrunch. “The crime has stayed the same, it’s just the modality that’s different.”

As the industry worries over what lies ahead, lawyers and others in crypto space shared their thoughts with TechCrunch on what the classification of some crypto products as securities could mean for the industry.