N.Y. Attorney General Alleges Unregistered Dealers Selling Crypto Securities and Commodities

In a letter to five trading platforms, N.Y. Attoney General Letitia James notified them that certain crypto-assets are securities under the N.Y. law – the Martin Act – that requires sellers of securities within or from the state to register with the state. They are securities because they “promise a rate of return to investors, and deliver that return by (for instance) [dealers] trading with, or further lending or hypothecating, those virtual assets.” Moreover, she said that N.Y. courts have held that Bitcoin and other virtual currencies are commodities under the Martin Act and therefore dealers in such crypto-currencies must also register. Apparently she told two of the dealers to stop operations and three others to provide more information. The letters indicate that Ms. James views many of the crypto-assets as either securities or commodities, and therefore that dealers in them must be registered under the Martin Act and of course would be subject to regulation and review and such things as anti-money laundering rules.