CFTC commissioner warns against infringing on SEC’s authority in KuCoin case

Caroline Pham, a commissioner with the United States Commodity Futures Trading Commission (CFTC), has suggested that a recent “aggressive” crypto enforcement action could put the regulator at odds with the Securities and Exchange Commission (SEC).

In a March 29 statement, Pham said the CFTC appeared to have exerted authority over certain securities in its enforcement case against cryptocurrency exchange KuCoin. The commission charged the firm “with multiple violations of the Commodity Exchange Act (CEA) and CFTC regulations” on March 26, parallel to criminal charges from the U.S. Justice Department.

“The CFTC’s approach may infringe upon the SEC’s authority and undermine decades of robust investor protection laws by conflating a financial instrument with a financial activity, disrupting the foundations of securities markets,” said Pham. “Owning shares is not the same thing as trading derivatives.”

Related: KuCoin says user assets are unaffected by US SDNY indictment

Pham’s statement echoed concerns from many U.S. lawmakers and regulators about the role the CFTC and SEC should play over cryptocurrencies and how they are judged as commodities or securities. Officials representing both regulators have been at odds over Ether (ETH) recently, as crypto firm Prometheum announced it planned to offer custody services as a security.

The KuCoin complaint from the CFTC suggested that Ether was a commodity. However, legal experts said the SEC potentially labeling ETH as a security could impact the commission’s decision on several spot Ether exchange-traded fund applications in the pipeline.

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