Expect the SEC to Target More Token Exchanges After EtherDelta

The Securities and Exchange Commission's settlement with the founder of EtherDelta is likely the first of many enforcement actions to come against crypto token exchanges.

The news that the SEC had charged EtherDelta founder Zachary Coburn with operating an unregistered securities exchange can be seen as a shot across the bow of token-trading platforms.

Further, the case shows that even if so-called decentralized exchanges cannot be easily shut down, that does mean no one will be held liable for their activities.

Notably, the action was taken against Coburn even though he left EtherDelta in late 2017.

The trades of ethereum-based tokens on the platform cited by SEC took place between July 12, 2016 and December 17, 2017, around the time of his departure.

With regards to EtherDelta specifically, there were roughly 1,079 trades on EtherDelta over the past 24 hours, about 11 percent less than in the previous 24-hour period.

Although the SEC hasn't clarified which tokens that traded on EtherDelta it considered securities, this action hinted at who regulators consider liable for purportedly decentralized technologies.

Regardless of which specific tokens are eventually deemed by courts to be unregistered securities, Stephen Palley, a partner at the Washington, D.C.-based law firm Anderson Kill, told CoinDesk his reading of the order implies the majority of EtherDelta's volume came from "The purchase and sale of unregistered securities."

Several exchanges operating in the U.S., including AirSwap's rival Everbloom, avoid charging traders fees in an effort to reduce legal risks.

"It doesn't appear that taking a fee is relevant to their analysis of whether EtherDelta was acting as an exchange that should have registered or proceeded under an exemption, or not," Hinkes said.