The arrest of Celsius founder Alex Mashinsky on Thursday has sparked a debate over how to treat crypto and whether existing laws are sufficient to regulate companies like Binance and Coinbase. Mashinsky has pleaded not guilty to charges including wire fraud and securities fraud, and his lawyers have stated that he vehemently denies the allegations. The same day, a New York court ruled partially in favor of Ripple, saying that the XRP token wasn’t an investment contract when sold algorithmically on exchanges, and hence doesn’t fall under securities law. This could have implications for cases taken by the SEC against Coinbase (COIN), Binance and Bittrex, arguing that they should have registered because tokens traded on those platforms, such as Solana (SOL), Polygon (MATIC) and Cardano (ADA), fall under its purview.
The SEC has stressed that existing rules designed to protect investors, many of which date back to the 1930s, already apply to crypto companies like Celsius. “The misconduct here is yet another example of the need for crypto market participants to come into compliance with our securities laws,” said the agency’s Enforcement Director Gurbir Grewal. However, CFTC Commissioner Kristin N. Johnson believes that “the lack of a clear regulatory framework for digital assets allowed this fraud to flourish” and that “customers and the public would be better served by a comprehensive regulatory regime that could prevent frauds like this one from developing in the first place.”
The arrest of Alex Mashinsky has reignited the debate over how to regulate crypto and whether existing laws are sufficient. Ripple’s case, in which the XRP token was ruled not to be an investment contract, could have implications for the SEC’s cases against Coinbase (COIN), Binance and Bittrex. The SEC has argued that current laws are clear and that these companies should have registered, while the CFTC believes that a comprehensive regulatory regime is needed to prevent fraud.