In a recent post for X, analyst and general counsel Metallor draws attention to an important historical event: an action taken by New York State Attorney General (NYAG) Letitia James about a year ago . In this past move, Attorney General James made headlines when he publicly argued that Ethereum, one of the market's leading cryptocurrencies, should be treated as a security.
This interpretation was not just a statement, but was supported by concrete actions in which the NYAG Secretariat issued a press release supporting this development.
The SEC's position on Ethereum's classification has not yet been determined, but pressure from Ethereum ETFs could prompt action. An ongoing lawsuit by the New York State Attorney General's Office against KuCoin in which Ethereum was claimed to be a security reveals why Ethereum's status is under scrutiny.
The press release emphasized the gravity of the situation and emphasized that such action by regulators is a precedent-setting event. This underscores the importance of legal proceedings and shows that NYAG is taking Ethereum's classification seriously and pursuing it in court.
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Is ETH identified as a security?
According to Metalaw, one of the notable aspects of the lawsuit is the claim that Ethereum (ETH), one of the largest cryptocurrencies, is a security. This is the first time a regulator has made such a claim regarding ETH, and this interpretation sets a precedent in court. The lawsuit claims that ETH, LUNA, and other cryptocurrencies such as TerraUSD (UST) are speculative assets that must be registered before they can be sold.
This is the first time the New York Attorney General's Office has cited Ethereum (ETH) as a security because of a new way to verify transactions called proof of stake. The changes will allow people to earn rewards for holding Ethereum, which regulators view as similar to earning interest on an investment.
Now, regulators like SEC Chairman Gary Gensler are saying that tokens like Ethereum could therefore be considered securities under U.S. law. As Ethereum staking grows in popularity, the debate over whether it is a security has become even more heated.
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Are there legal issues with ETH?
NYAG claims that Ethereum (ETH) is not decentralized enough to be considered a security. They point to Vitalik Buterin and the Ethereum Foundation as having a major influence on the development of ETH, including the transition to proof-of-stake.
Additionally, it highlights the promotion of ETH as an investment opportunity and the large stake held by Vitalik Buterin and the Ethereum Foundation. Regulators believe that ETH lacks the full decentralization and mining creation needed to escape classification as a security.
