Cryptocurrency Presents Unique Legal Remedies
Cryptocurrency has been murky from a legal perspective in the U.S.
IntroductionCryptocurrency has been murky from a legal perspective in the U.S.
Investors have struggled with companies that don't follow through on their promises. There is a potential for hacks and fraud. But while a lot of attention has been paid to the ways that federal prosecutors and regulators like the SEC view cryptocurrency, there are personal legal implications to consider as well.
Individual Lawsuits PossibleAccording to a report by Coin Desk, "buyers can sue sellers privately under the federal securities laws" which govern similar types of transactions. Companies and individuals looking to make sales of cryptocurrency should be aware of these risks.
At the same time, in the ever-changing world of cryptocurrency, buyers should know that there are remedies available to them if they are treated unfairly throughout the process.
Is Cryptocurrency a Security?A great deal of the legal details concerning cryptocurrency comes down to the question of whether or not a coin can be considered a security. This is one of the most hotly contested issues in the cryptocurrency world, and a simple answer remains elusive.
In cases where cryptocurrency is part of an offering of a security, federal law stipulates that the seller of that security must register it or find an exception. If the seller does not, the SEC may step in to enforce the sale or sanction the seller. Most investors are at least somewhat familiar with the security classification issue and its ramifications.
However, fewer cryptocurrency investors know that the Securities and Exchange Act of 1933 stipulates that a person who buys an unregistered security can actually sue the seller individually to get his money back. This puts some of the power to determine whether purchasing cryptocurrency is or is not a securities sale in the power of the individual investor. This legal detail also means that the remedy would be wide-ranging, and a company implicated in such an unregistered security sale might have to completely refund the investor base.
These issues and a buyer's remedies will be part of this evolving area of cryptocurrency.