New York's AG sues KuCoin, alleging the Seychelles-based crypto exchange offers tokens, such as ETH, that meet the definition of a security, without registering

A press release said the lawsuit was part of ongoing “efforts to crack down on unregistered cryptocurrency platforms.”

CoinDesk 2023-03-10

Context & Ripple Effects

The suit follows the New York AG’s 2018 information request to 13 crypto exchanges, extending scrutiny from operational disclosures to whether a platform must register to offer particular tokens. It puts KuCoin and ETH at the center of a state-level test of that classification.

The case later produced a concrete market-access outcome: KuCoin agreed to block New York users and pay $22 million to resolve the action. That resolution shows how state enforcement can change an exchange’s customer footprint without resolving the broader status of every token.

First-order effects

KuCoin faces a New York enforcement action over its alleged unregistered offering of tokens including ETH, while the complaint places ETH’s security status directly at issue in the state case.
ETH, SOL and XRP fell roughly 6–10%, with ETH down as much as 15%, as traders reacted to the enforcement claim.

Second-order effects

Exchanges serving New York users face pressure to reassess token availability and registration exposure; KuCoin’s later New York exit demonstrates the operational cost of that pressure.
Token issuers and trading venues must contend with a classification dispute that can affect liquidity and access even before a definitive industry-wide rule is established.

Third-order effects

New York’s progression from an exchange inquiry to platform-specific suits points to state attorneys general becoming durable gatekeepers of digital-market access when federal crypto rules are contested.
If this enforcement pattern persists, crypto platforms may increasingly segment products and users by state rather than operate under a single national compliance posture.

The trend: Crypto-market regulation is moving from broad exchange oversight toward enforcement actions that use token classification to reshape platform access state by state.

Discussion

@tier10k @tier10k on x
[DB] NYAG Claims Ethereum Is a Security in Kucoin Lawsuit
@newyorkstateag Ny Ag on x
I'm suing cryptocurrency platform @kucoincom for illegally operating in New York without registering with the state. This is our eighth action to rein in shadowy cryptocurrency platforms that disregard our laws and put New Yorkers at risk.
@ap_abacus Andrew on x
UPDATE: Gary Gensler two weeks ago in an interview - “everything other than #Bitcoin is a security.” **Today: NYAG files suit against KuCoin and claims that #Ethereum is a security.
@tier10k @tier10k on x
https://twitter.com/...
@neerajka Neeraj K. Agrawal on x
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 the mean time, our argument for why ETH is not a security is unchanged: https://www.coincenter.org/...
@collins_belton Collins Belton on x
TL;DR - NYAG claiming eth is a security because of ICO, small number of developers driving most core dev, and proof of stake altered the incentive and profit expectations of holders. Ultimate boss battle time is approaching. https://twitter.com/...
@twobitidiot @twobitidiot on x
ETH is not a security. The administrative state is completely out of control.
@citronresearch @citronresearch on x
2/ This is not a comment on $BTC which is an alternative asset but $ETH which instead of a promised “network” has become a security and now the @NewYorkStateAG is going to end the charade. https://markets.businessinsider.com/ ...
@leomschwartz Leo Schwartz on x
New York's attorney general files a lawsuit against the crypto exchange KuCoin, alleging that it sold securities without registering as a securities broker or dealer. Diverging from the CFTC, the lawsuit describes tether and ether as securities: https://twitter.com/...
@smdiehl Stephen Diehl on x
Important lawsuit. Finally going to set precedent that all these companies that raised under illegal ICO offerings and SAFTs were doing so illegally. Including the original Ethereum security offering. https://ag.ny.gov/...
@joeconsorti @joeconsorti on x
Turns out if you — • issue an asset • maintain a level of central control over that asset's issuance and rules • & profit from that asset — that asset is a security. ETH is circling the drain, inches away from being legally considered a security. https://twitter.com/...
@scott_lew_is @scott_lew_is on x
NYAG just said eth was a security. it's all a joke. perpetuated by a faction of unjust government officials. time to organize.
@mdudas Mike Dudas on x
nyag @tishjames is an embarrassment and hindrance to the great state of ny attacking this century's greatest financial innovations is contrary to everything ny and america stand for we are destroying our greatest advantages for woke political points https://ag.ny.gov/... https://…
@iamdcinvestor @iamdcinvestor on x
bold of NYAG to go after Seychelles-based Kucoin when there are several “securities dealers” domiciled in the US via every exchange (by their definition) precedent has already been set by previous regulators that ETH is not a security good luck to these clowns in court 🤡
@adamscochran Adam Cochran on x
Seems like NYAG didn't read: https://isethereumasecurity.com/ 🤷‍♂️ https://twitter.com/...
@josh_blockchain Joshua Ashley Klayman on x
H/T @daltonan: “This action is one of the first times a regulator is claiming in court that ETH, one of the largest cryptocurrencies available, is a security. The petition argues that ETH, just like LUNA and UST, is a speculative asset that relies on the https://ag.ny.gov/...... …
@dogetoshi Steven on x
This reads actually pretty bad lol https://twitter.com/... https://twitter.com/...
@erikvoorhees Erik Voorhees on x
So the state will attack BTC for using electricity, and ETH for being a security. Wise people in crypto will defend both, easily. The attack will fail on both counts, and the blocks will keep ticking... and on the horizon you can almost see fiat's arms flailing in desperation.
@dylanleclair_ Dylan LeClair on x
🚨🚨New York Attorney General claims that Ethereum is a security in Kucoin lawsuit🚨🚨 https://twitter.com/...
@0xsisyphus @0xsisyphus on x
Although ETH is likely a security, [my token I want to go up] is not. Please keep this in mind
@wizardofsoho @wizardofsoho on x
LMfao.. Eth bein security fud... Kucoin investigation.. Bad data on employment today... .. huge risk event tomrw.. lmfao. the hits just hitting non stop today. gg. Time to grab a drink and watch the fierworks
@basedkarbon @basedkarbon on x
Bitcoiners called it at $5 eth https://twitter.com/...
@brianroemmele Brian Roemmele on x
“ETH is a security”—NY AG. Been saying since 2011, I must be a mineable coin... or it will not end well. So here we are. https://twitter.com/...
@neerajka Neeraj K. Agrawal on x
they didnt sell eth. eth didnt exist. they sold a promise for future eth. that promise was the security https://twitter.com/...
@johnedeaton1 John E Deaton on x
ETH holders said I was spreading FUD when I said we must fight together (I'm an #ETH holder) b/c until Congress acts, one speech by a guy who isn't at the SEC anymore, doesn't mean 💩 If you think there isn't coordination between the SEC and NYAG you're not paying attention. https…
@crediblecrypto @crediblecrypto on x
Lol here we go. Nothing is safe from institutional overreach. $XRP holders were screaming about this two years ago when half of CT was turning a blind eye to the SEC overreach in the #Ripple lawsuit. https://twitter.com/...
@satsdart @satsdart on x
People selling their ETH on the news that it achieved security, same guys that were complaining about defi hacks all the time too 🤦‍♂️🤦‍♂️🤦‍♂️🤦‍♂️
@givnerariel @givnerariel on x
Today, a NY Attorney General (AG) filed suit against KuCoin for allegedly violating securities laws by offering tokens - $ETH etc. - that meet the definition of a security w/o registering w/ the AG's office. TLDR; an official in court called $ETH a security. This is not great.
@karl_0x Karl on x
withdrawing all of my funds from kucoin
@travis_kling Travis Kling on x
If you're trying to get a sense of how spicy this is getting, NYAG filed this DURING a congressional hearing titled: “Coincidence or Coordinated? The Administration's Attack on the Digital Asset Ecosystem” https://twitter.com/...
@marcfawzi @marcfawzi on x
ETH is not a security. If it is then USDC cannot exist legally. You cannot threaten ETH without threatening Blackrock and Coinbase, and that's too much to chew for any regulator. The price of ETH is based more on demand for Ethereum network services than speculation. https://twit…
@lex_node @lex_node on x
I mean at least they're not using the stupid “Ethereum is a security because staking in PoS gives profits” argument. . . this argument is more coherent (i.e., that efforts needed to effect the upgrade from PoW to PoS made ETH part of an investment contract scheme during that... h…
@cryptojackiive @cryptojackiive on x
As I'm listening to a publicly traded mining company ceo talk about his business flywheel: Mine Btc ➡️ Sell Btc ➡️ Buy Eth ➡️ Stake Eth ➡️ Sell Rewards for Btc https://twitter.com/...
@adanthar @adanthar on x
read through the NYAG Kucoin complaint; they are clear that the transition to proof of stake makes ETH a security in their view, but this is another one of those things where suing an uninvolved third party while Coinbase is right there makes the argument look very, very weak
@hoffmang @hoffmang on x
The @NewYorkStateAG sued @kucoincom for doing business in NY w/o a license but the headline really is that the AG takes the position that $ETH is a security. https://ag.ny.gov/... https://twitter.com/...

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