NY AG's Office Urged SEC to Classify Ethereum as a Security During KuCoin Case

Coinbase released internal U.S. Securities and Exchange Commission communications showing that New York's top law enforcement office urged the agency to classify Ethereum

Coinbase has released internal U.S. Securities and Exchange Commission communications showing that New York's top law enforcement office urged the agency to classify Ethereum (CRYPTO: ETH) as a security during its legal pursuit of crypto exchange KuCoin in 2023.

The request, reportedly made by the New York Attorney General's office, adds another layer to the ongoing debate over digital asset classifications and the federal agencies responsible for them.

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According to a report by Coindesk, the communication came from Shamiso Maswoswe, head of the New York Attorney General’s Investor Protection Bureau, who explicitly asked the SEC to weigh in on Ethereum's legal status in support of the state's case.

Maswoswe noted that while the classification wouldn’t determine the case's outcome, since the state has jurisdiction over both securities and commodities, it would help “get a court to hold that Ether is a security,” which she argued would enhance investor protection.

The SEC, however, remained silent. It had previously hinted at Ethereum's commodity status but became more ambiguous after Ethereum transitioned to proof-of-stake. Ultimately, the agency refrained from filing any statement on ETH's status in the KuCoin matter.

Coinbase is releasing the document as part of a wider effort to make public the communications it has obtained through Freedom of Information Act requests. These materials include emails and internal notes that reveal how federal regulators have handled, or avoided, key decisions on crypto asset classifications.

The latest batch includes messages not only about Ethereum but also about Ripple (CRYPTO: XRP) and XRP. In one 2021 email, SEC staff debated whether Ripple's blockchain was decentralized.

The SEC was even ordered to return a portion of the penalties it had previously collected. The friction between New York's request and the SEC's muted response highlights broader jurisdictional confusion at the federal level.

While New York's Department of Financial Services oversees both securities and commodities, federal regulation remains divided between the SEC and the Commodity Futures Trading Commission, with overlapping and often conflicting mandates.

New York's enforcement action against KuCoin concluded in December 2023, with a $22 million settlement. The state alleged the exchange failed to register to operate legally.