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Opinion
Matt Levine

The SEC Has Its Eye on Crypto

Also Robinhood, Archegos bonuses and ransomware.

The U.S. Securities and Exchange Commission is not in the general investor-protection business. If someone comes to you and offers you a can’t-lose opportunity to buy Florida swampland, and it turns out they’re lying, the SEC will not get involved. If they sell you fake gold coins or forged Picassos, the SEC will not get involved. If they lie to you in the course of selling you complicated commodity futures contracts, the SEC will not get involved. (The Commodity Futures Trading Commission will.) The SEC is in the business of protecting investors in securities. If someone comes to you and offers you a can’t-lose opportunity to buy stock in a cannabis company, and it turns out they’re lying, then the SEC will get involved.

You could imagine a narrow, minimalist SEC approach, one that says something like “if people lie to you while trying to sell you stock in some crazy company, the SEC will go after them, but other than that you’re on your own.” But in fact that has never been the SEC’s approach. For many decades now, the SEC — and U.S. securities law generally — has taken a pretty expansive view of what a “security” is. The famous case is SEC v. W.J. Howey Co., where the Supreme Court almost did rule that a can’t-lose investment opportunity in Florida swampland counts as a security. Technically the land was citrus groves, and the land itself wasn’t a security, but an “investment contract” where someone else harvested the oranges for you was. All sorts of things in the world might not be securities, but organized investment opportunities in those things will turn out to be securities. Or at least the SEC will argue that they are.