- The US Securities and Exchange Commission (SEC) threatens Immutable with legal action but hasn’t specified its wrongdoings.
- Industry leaders like Brian Armstrong are willing to fight against regulatory overreach and think the SEC should issue an apology.
- The EU is implementing stricter regulations for crypto exchanges, including new tax reporting requirements.
The SEC issued a Wells notice to Web3 gaming firm Immutable, threatening a lawsuit despite not specifying the alleged misconduct.
Does it surprise anyone? Unlikely.
The SEC’s regulation by enforcement history is well-documented, and Immutable is just another unfortunate victim on a long list that already features Uniswap, Ripple, OpenSea, Coinbase, and others.
Why is the SEC going after Immutable, and (perhaps a rhetorical question) will this farce ever stop? Let’s unpack the situation.
Is $IMX a Security?
Although the SEC’s allegations are unclear, Immutable thinks they’re rooted in the $IMX token sale from 2021, when the company raised over $12.5M.
The SEC has been calling tokens like $XRP securities since 2020. Although the Court disproved it, the regulator evidently disagrees with the rule of law and continues to escalate the conflict.
After the last appeal against Ripple from the SEC, the Court now awaits a brief on the case by January 15. If the SEC fails to submit it, the appeal will be dismissed.
In the Wells notice to Immutable, the SEC cited statutory provisions but didn’t make any meaningful connections to $IMX.
$IMX is a utility token used to pay transaction fees on the Immutable platform. A security is a financial instrument that represents a monetary investment in a common enterprise with the expectation of profits from the efforts of others.
$IMX doesn’t meet the definition of a security because its purpose is to facilitate transactions, not generate profits.
The regulator also claimed Immutable misled the public about $IMX backing, including a purportedly non-existent ‘pre-launch investment’ from Huobi Ventures, which Immutable reported in a 2021 blog post.
Industry Unites Against the SEC
Immutable believes the SEC’s approach stifles innovation in an already challenging industry. Instead of clear regulations, companies get millions in legal fees.
But court expenses don’t scare Immutable – the company is ready to fight for the rights of game developers, players, and the entire crypto industry.
Coinbase CEO Brian Armstrong also commented on the SEC’s regulatory overreach, pointing out its often conflicting statements.
Namely, the SEC can’t give a straight answer to whether existing digital assets laws are clear. It can’t even decide whether it has the power to regulate crypto exchanges.
Armstrong says the next SEC chair must drop all baseless cases and apologize to the American public. It wouldn’t undo the damage, but it might restore trust in the regulator.
EU Tightens the Screws
Despite the SEC’s power play, the upcoming US elections give hope for a brighter future for digital assets. Meanwhile, the EU’s crypto industry also struggles with regulatory scrutiny.
The Netherlands’ central bank fined the crypto exchange ByBit $2.4M for not having proper registration. The CEX has allegedly breached local anti-money laundering and terrorist financing laws.
ByBit acknowledged its wrongdoing and promised to cooperate with European regulators. Beyond reporting suspicious activity, crypto trading platforms will have to comply with new tax monitoring rules.
A Better Future Ahead? Maybe
The SEC’s relentless pursuit of crypto companies highlights its disregard for innovation. Besides, vague accusations suggest the regulator is more interested in exerting control than developing clear guidelines.
While the SEC continues to hinder the industry’s growth, the US has no chance of becoming a global crypto powerhouse. We can only hope that the elections will redirect the country’s path.
