SEC Sued by Legit Exchange

The Breakdown First Five - Thursday, February 22, 2024

Welcome back to The Breakdown First Five — the 5 most interesting and/or important stories in bitcoin, crypto, and markets to start your day.

5. Kwon Extradited to US

The Montenegro High Court has finally ordered Do Kwon to be extradited to the US, and this time it looks like the decision will stick. After months of appeals, local reports indicate that a new ruling has repaired previous defects and Kwon will soon be on a plane to New York. Kwon has said he will testify at the SEC trial scheduled for late March and the DOJ no doubt has a thick criminal indictment waiting to be unsealed. 

4. SEC Loses Top Litigator

The SEC’s head of crypto litigation has left the regulator to go into private practice. Ladan Stewart will join the firm of White & Case as a partner, providing advice and defense for crypto firms who are dealing with the SEC. Earlier reporting suggested that additional SEC litigators were also looking for the exit. Crypto figures are split on whether former SEC lawyers should be blacklisted among the industry, but at least the SEC is bleeding talent. 

3. Tether Noncommittal on Tron

With the shock exit of Circle from Tron, all eyes were on Tether to see if they would follow suit. The stablecoin issuer was noncommittal, claiming that “Tether tokens are issued on several blockchains, which are simply transport layers for such tokens.” They talked up their compliance standards but failed to give a solid answer. Tron hosts over half of Tether’s supply, so the decision to drop Tron would be a pivotal moment in crypto history. 

2. Coinbase Correlates ETH Markets

Coinbase has filed a public comment on the Grayscale ETH ETF, claiming that ETH futures and spot markets have a 99% correlation, with the data to back it up. The equivalent study on Bitcoin futures correlation was a lynchpin in the Bitcoin ETF approval, so this letter could do the same for Ethereum. It also spells out the legal argument that ETH is a commodity, rather than a security, handing the SEC everything they need to approve. Let’s see if it’s that easy. 

1. Exchange Takes the Fight to the SEC

A new platform called Legit Exchange has sued the SEC for a declaratory judgment. The non-custodial exchange will ask a Texas Federal Court to declare that most crypto tokens are not securities and that the SEC has no jurisdiction. The new exchange is the brainchild of Alliance DAO Counsel Mike Wawszczak and has the backing of the biggest names in crypto venture. The pre-launch lawsuit appears to be a test case designed to test the SEC’s theories.