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The legal battle between the U.S. Securities and Exchange Commission (SEC) and cryptocurrency exchange FTX continues, with new documents revealing the regulator's stance on crypto derivatives.

According to a report by The Block, internal SEC documents from 2023 have come to light, shedding light on the agency's thinking regarding crypto derivatives and the agency's role in overseeing them.

The documents highlight the SEC's view that crypto derivatives present "unique risks" compared to traditional derivatives, particularly due to the "potential for market manipulation and abuse."

The documents also touch upon the difficulties faced by the SEC in policing crypto derivatives offered by offshore exchanges.

The documents highlight the difficulties faced by the SEC in policing crypto derivatives offered by offshore exchanges.

"Congress tasked the Commission with policing the fringes of the securities markets to prevent fraud and manipulation wherever it occurs," the documents state. "The Commission takes this responsibility seriously, especially as technological innovation continues to blur the lines between traditional and digital assets."

The documents further reveal that the SEC is considering whether it should register any crypto derivatives products.

"The Commission is actively evaluating the legal and policy issues presented by digital asset derivatives and will continue to take appropriate steps to protect investors and ensure the fair, orderly, and efficient markets," the documents conclude.

This legal battle began in December 2023 when the SEC sued FTX for allegedly defrauding investors through the sale of unregistered securities.

The regulator claims that FTX engaged in several fraudulent activities, including selling unregistered securities to U.S. investors, misusing customer funds, and providing false information to flout federal securities law.

In March 2024, the SEC amended its lawsuit to include FTX's founder, Sam Bankman-Fried, and former colleagues, accusing them of orchestrating a "scam" to defraud investors in a lawsuit that could decide the legal fate of crypto in the U.S.

The SEC's case centers around the assertion that FTX sold unregistered securities to U.S. investors through its FTT token, which the exchange used to raise billions of dollars.