“It’s like driving down the road, with no signs or lanes, trying to figure out the rules based on who gets pulled over,” says Dave Siemer, CEO at Los Angeles–based crypto investment firm Wave Digital Assets. But this is made difficult by the lack of crypto-specific guidelines from both agencies. In the absence of clear guidance from Congress as to whether the SEC or CFTC should take point on regulating the industry, crypto businesses must do what they can to anticipate possible complaints from both directions. Binance declined to provide on the record responses to further questions about the lawsuit. In a blog post responding to the CFTC lawsuit, Zhao said that Binance “does not agree with the characterization of many of the issues alleged in the complaint.” He also described the lawsuit as “disappointing,” particularly because Binance had been “working cooperatively” with the CFTC. “This should be a warning to anyone in the digital asset world that the CFTC will not tolerate willful avoidance of US law,” he wrote. The CFTC did not respond to a request for an interview, but in a statement announcing the lawsuit, Rostin Benham, CFTC chairman, set the stage for further action against crypto firms. The agency’s lawsuit against Binance-by far the world’s largest crypto exchange, which has until now remained largely out of reach of US regulators-specifically refers to popular cryptocurrencies, including bitcoin, ether, and litecoin, as commodities. The SEC’s tilt at the industry has been met by a refusal at the CFTC to yield jurisdiction. SEC chair Gary Gensler's office did not respond to a request for comment. “And one way to plant a flag is to bring enforcement action.” Even though the agency’s actions are motivated by a desire to protect investors, “the strategy is one of jurisdictional maximalization,” she says.
We have not provided a road to compliance, and instead have been bringing enforcement actions after the fact,” says Peirce. “I don’t think FTX was the cause, as much as the excuse.”
“If people wondered what the attitude was at the beginning of the year, now they know it’s hostile,” says Mick Mulvaney, a former White House chief of staff and an advisor to crypto compliance platform Astra Protocol. After the dramatic collapse of FTX in November 2022, both regulators have adopted a more aggressive-even hostile-approach to the crypto industry, using enforcement actions to stake their claim to jurisdiction. That two different exchanges can be sanctioned by two different regulators for alleged violations of entirely different regulatory regimes shows the increasing complexity of the operating environment for crypto firms in the US, as a turf war between the SEC and the CFTC escalates.
But on March 27, Binance, the world’s biggest crypto exchange, and its founder Changpeng Zhao were charged by a different regulator, the Commodities and Futures Trading Commission (CFTC), with breaking commodities laws-because, the CFTC says, popular crypto assets are commodities. Crypto assets, the SEC insists, are securities, and so fall under its jurisdiction.
On March 22, Coinbase, one of the world’s largest crypto exchanges, was sent a notice by the US Securities and Exchange Commission (SEC) warning that the regulator planned to sue, alleging the company had violated securities laws.
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