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SEC v. Cardano: Legal Expert Slams Allegations as Weak, Here's Why

Sun, 06/11/2023 - 11:14
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Gamza Khanzadaev
Expert analysis reveals why SEC's case against Cardano crumbles
SEC v. Cardano: Legal Expert Slams Allegations as Weak, Here's Why
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In a recent Twitter exchange, legal expert and digital assets enthusiast Bill Morgan criticized the SEC's classification of Cardano token, ADA, as a security. Morgan took to the public to express his doubts, questioning the regulator's reasoning behind this assertion.

Highlighting the nature of technological advancements, Morgan drew a parallel between the evolution of smartphones and the development of cryptocurrencies. He argued that when creators introduce improvements and share information about their product's features, it is merely an attempt to stay competitive and boost sales. However, he pointed out that the SEC seems to treat these efforts differently when it comes to cryptocurrencies like Cardano.

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As reported by U.Today, the Cardano token is deemed a security by the SEC based on public information shared by Cardano, Input Output (IOHK) and Emurgo, particularly since the initial token sale. The lawsuit claims that buyers of ADA believed it was an investment in these entities, expecting to profit from their development efforts and an increase in token value.

Morgan further speculated that Cardano creator Charles Hoskinson must be confident that the court will not deem sales or offers by Cardano as investment contracts or classify ADA sold in secondary markets as securities.

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However, Mark Fagel, an ex-attorney specializing in SEC law enforcement, offered a counterpoint. Fagel queried whether there were 30 secondary market exchanges where smartphones could be listed for investment purposes, implying a distinction between traditional products and cryptocurrencies.

Morgan acknowledged the difference Fagel raised, noting that cryptocurrencies like ADA could be acquired outside of exchanges. He added that this distinction might exist but was unsure if it alone justified classifying ADA as a security.

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About the author

Financial analyst, trader and crypto enthusiast.

Gamza graduated with a degree in finance and credit with a specialization in securities and financial derivatives. He then also completed a master's program in banking and asset management.

He wants to have a hand in covering economic and fintech topics, as well as educate more people about cryptocurrencies and blockchain.