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Is Cardano a security? Lawyers have their say…

2min Read

After the SEC’s take on Cardano, lawyers seem to be chipping in with their own opinions.

Is Cardano a security? Lawyers have their say...

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  • Morgan compared the development of cryptocurrencies to that of smartphones
  • Fagel disagreed, saying that crypto is being traded exactly like any other security

Pro-crypto Australian lawyer Bill Morgan has criticized the U.S. Securities and Exchange Commission (SEC) for classifying Cardano’s native cryptocurrency, ADA, as a security.

Two days ago, Morgan took to Twitter to express his doubts, questioning the regulator’s reasoning behind this assertion.

Morgan compared the development of cryptocurrencies to the evolution of smartphones. He contended that when developers introduce updates and disclose information about their products’ qualities, it is only an attempt to remain competitive and increase sales. So, a blockchain is no different.

Morgan pointed out that the SEC, however, seems to consider these efforts differently when it comes to cryptocurrencies like Cardano. The SEC considers ADA under the securities law, while smartphone manufacturers are outside the SEC’s such assumptions.

Marc Fagel, a securities lawyer, however, asked if there were 30 secondary market exchanges where smartphones are listed for other investors to buy for investment opportunities. Crypto is, in fact, being traded exactly like any other security and it’s not a clear-cut issue, Fagel said.

Morgan then acquiesced that cryptocurrency does resemble the function of security when it is traded.

Crypto not security under statutory definition, Morgan claims

Morgan has been tweeting about the issue for the past few days since the SEC classified ADA as a security in its lawsuit.

Morgan later responded to Fagel on Twitter, stating that ADA is deemed a security by the SEC as per the lawsuit, particularly since the initial coin offering (ICO). He opined that ADA tokens being offered on overseas ICOs lie outside the purview of the SEC as overseas ICOs are beyond the reach of the Securities Act.

“I don’t see how those sales fall under the definition of an investment contract under the Securities Act because the Act does not apply to the ICO. They are not domestic transactions.”

According to Morgan, while stock is inherently a security by statutory definition, crypto is not a recognized category of security by statutory definition.

ADA has lost over 25% of its value since the SEC’s enforcement action last Monday. The token, however, seemed to recover over the weekend. At press time, it was trading at $0.2834.

Source: TradingView

Source: TradingView


Saman Waris works as a News Editor at AMBCrypto. She has always been fascinated by how the tides of finance and technology shape communities across demographics. Cryptocurrencies are of particular interest to Saman, with much of her writing centered around understanding how ideas like Momentum and Greater Fool theories apply to altcoins, specifically, memecoins. A graduate in history, Saman worked the sports beat before diving into crypto. Prior to joining AMBCrypto 2 years ago, Saman was a News Editor at Sportskeeda. This was preceded by her stint as Editor-in-Chief at EssentiallySports.
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