US regulators tighten hold over crypto as judge rules NBA Top Shots NFTs as “plausible securities”

The United States crypto market took a big hit on Wednesday as authorities rained on the market in different ways. This furthered the discussion of crypto regulation, with Representative Maxine Waters demanding cooperation from all the government regulatory agencies.

US regulators have a field day

On Wednesday, the crypto market suffered the first blow at the hands of Judge Victor Marreno. Judge Marreno rejected the motion submitted by Dapper Labs to dismiss the case brought on by the Securities and Exchange Commission (SEC). The agency alleged that the Dapper Labs produced NBA Top Shots NFTs were unregistered securities.

Judge Marreno ruled that the basis of SEC's allegations was indeed "facially plausible" as, on a technical level, the NFTs do exist on a blockchain. The SEC is leaning towards the Howey Test, which will determine whether the NFTs are a security or not. However, the case is far from its final ruling as it might be difficult to justify how a consumer good like a basketball card is a security.

New York joins the band

In the wee hours of Thursday, New York State Attorney General Letitia James sued the cryptocurrency exchange CoinEx. Per the filing, the exchange has been operating as an unregistered securities broker. The exchange was accused of listing tokens that qualified as Securities.

The filing noted that,

"CoinEx is engaged in the business of selling and offering to sell commodities through accounts, agreements, or contracts to accounts in New York primarily for investment purposes. The Tokens are also securities under the Martin Act because they represent investments of money in common enterprises with profits to be derived primarily from the efforts of others."

Additionally, Letitia's office also alleged cryptocurrency tokens like LUNA, AMP, RLY and LBC also fell under the category as securities under state law.

Regulatory pressure increases

With every passing day, the regulators' approach towards cryptocurrency is becoming stricter, leading to concerns in the market. The last few months have seen regulators, including SEC, Commodity Futures Trading Commission (CFTC), and the Feds take a swing at the market. 

Bankrupt exchange FTX and its founder, Sam Bankman-Fried, are facing criminal charges. Moreover, crypto exchange Kraken is facing a $30 million penalty and a shut down of its staking services. The fraud charges faced by Terraform Labs and founder, Do Kwon, for the Terra LUNA debacle as well as the Well's notice received by Paxos, resulting in a suspension of Binance USD (BUSD) issuance, are all examples of the same.

Thus, suggestions for tightening regulatory approach are incoming, as California Representative Maxine Waters said to Cointelegraph,

"To the CFTC and to the SEC: I am not going to get in between any disagreement, any dislike, any of the approaches — the two of you had better come together so that we can deal with crypto," said Waters. "I think it's time for the Treasury, the Feds, the CFTC, the SEC, all of us better get together on crypto."

While the SEC Chair, Gary Gensler, did not state a clear picture of what to expect going ahead, it seems certain that the SEC will become far more serious in its approach.