Coin Center Disagrees With NYAG: Ethereum Is Not a Security

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Crypto advocacy group Coin Center has voiced their disagreement with New York Attorney General Letitia James’ recent claims that Ethereum (ETH) is a security. The think tank has outlined why they believe ETH does not meet the criteria of an investment contract.

In a lawsuit against crypto exchange Kucoin, James argued that Ethereum is a security that relies on the efforts of third-party developers to generate profits for its holders. The Attorney General referred to ETH as “a speculative asset” and placed it in the same group as the collapsed crypto project Terra (LUNA) and its algorithmic stablecoin TerraUSD (UST).

Neeraj Agrawal, director of communications at Coin Center, refuted the NYAG’s assertions and said the think tank’s view on Ethereum remains unchanged.

“Obviously, we disagree with the NYAG’s argument that ETH is a security. Coin Center will be monitoring the case and if there’s an opportunity to weigh in, we will.” 

In 2018, Coin Center published a blog post explaining why it believes Ethereum is not a security. According to the group, while Ethereum may have met one of the prongs of the Howey test when it was issued in 2014, ETH in its current form is not a security. The Howey framework defines an “investment contract” as a transaction where a person “invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter, sponsor or other third party.”

Coin Center argued that Ethereum in its current iteration is “too useful and too decentralized” and that ETH’s value does not rely on the efforts of a discernible third party to generate profits.

“The value of Ether and the functionality of the Ethereum network is not reliant on the [Ethereum] Foundation, rather it flows from the efforts of thousands of unaffiliated developers, miners, and users…  

Conflating the pre-sale and the running network is confused analysis that could be misunderstanding the tech or the law or both.” 

At time of writing, Ethereum is trading for $1,466.

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