The US Securities and Exchange Commission says they’ve settled charges against Zachary Coburn, owner of the Ethereum-based token trading platform EtherDelta.
The SEC charged Coburn with unlawfully operating a securities exchange. According to the agency, EtherDelta qualified as a securities exchange under the SEC’s definition, but failed to register as one.
The popular crypto exchange is well known for offering a huge variety of ERC20 based tokens.
Stephanie Avakian, co-director of the SEC’s Enforcement Division, says,
“EtherDelta had both the user interface and underlying functionality of an online national securities exchange and was required to register with the SEC or qualify for an exemption.”
Despite these laws being defined in the 2017 DAO Report, which concluded certain digital assets were securities, EtherDelta continued trading without registering.
Part of what makes the EtherDelta case unique is that it is a decentralized exchange that runs on smart contracts. There is no individual behind it, it runs entirely on the code, while centralized exchanges like Coinbase are run by individuals.
The SEC says that it does not matter one way or the other. The writer of the code must accept the same responsibility as the individuals behind a centralized exchange.
Robert Cohen, chief of SEC’s cyber unit, explains,
“The focus is not on the label you put on something or the technology you’re using. The focus is on the function, and what the platform is doing. Whether it’s decentralized or not, whether it’s on a smart contract or not, what matters is it’s an exchange.”
The SEC described Coburn as “cooperative.” He is required to pay about $400,000 in fines.