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SEC Releases Statement on Platforms Trading Digital Assets

On March 7, the Securities and Exchange Commission released an advisory regarding platforms used to trade digital assets. The SEC expressed concern that, in light of the rise in popularity of trading digital assets, including coins and tokens in initial coin offerings, investors could mistakenly believe that platforms used to trade such assets are registered with the SEC or are otherwise regulated.  In order to protect investors, the SEC indicated that it plans to focus on such platforms and their compliance with federal securities laws.

One section of the SEC’s statement is directed towards investors. The SEC notes that many platforms refer to themselves as “exchanges,” which does not necessarily mean such platforms are regulated or that information from such platforms has the same integrity as information from registered exchanges.  The SEC encourages investors to use registered platforms or entities, such as national securities exchanges, alternative trading systems and broker-dealers, to obtain the protections of federal securities laws and SEC oversight.

The second section of the SEC’s statement addressing market participants that operate online platforms cautions such persons that, depending on whether the digital assets traded on such platforms are considered securities, SEC exchange registration requirements or requirements associated with operating as an alternative trading system may be triggered. The SEC also noted that trading platforms may not be considered exchanges under federal securities laws, but may be required to register in another capacity, such as a broker-dealer, transfer agent or clearing agency, depending on the functions they perform.

The SEC’s announcement is available here.

©2018 Katten Muchin Rosenman LLP

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About this Author

Janet M. Angstadt, Securities, Financial Services, Chicago, Lawyer, Katten Law FIrm
Partner

Janet M. Angstadt is the head of Katten's Chicago Financial Services practice. She focuses her practice on broker-dealer and exchange compliance issues and advises companies on matters regarding compliance with the regulations of the US Securities and Exchange Commission (SEC) and self-regulatory organizations (SROs).

Janet represents clients in a wide range of legal and regulatory matters, including mergers and acquisitions, SRO investigations, compliance issues related to registrations, sales practice, short sales, Regulation NMS, market-making and...

312.902.5494
Sarah Adams, New York Financial Services Attorney, Katten Law Firm
Associate

Sarah R. Adams concentrates her practice in financial services matters.

While in law school, Sarah was on the staff of the Georgetown Immigration Law Journal. She received her JD from the Georgetown University Law Center and her BA from Johns Hopkins University, with honors. Sarah is admitted to the bar in New York.

212-940-6350