- eToro has reached a $1.5 million settlement with the SEC for operating as an unregistered broker and clearing agency
- The platform will now restrict U.S. trading to Bitcoin, Bitcoin Cash, and Ether, cutting off access to most other crypto assets
- The settlement offers U.S. users 180 days to divest from unsupported crypto assets, with proceeds returned for untransferable assets
eToro USA has agreed to pay a $1.5 million fine to the Securities and Exchange Commission (SEC) after an investigation revealed the company had failed to register as a broker-dealer and clearing agency. The settlement requires eToro to drastically limit its U.S. crypto offerings, leaving only Bitcoin, Bitcoin Cash, and Ether available for trading. This settlement follows the SEC’s ongoing efforts to regulate the rapidly growing cryptocurrency industry and ensure platforms comply with existing securities laws.
Broker-dealer Net Catches eToro
eToro launched its crypto arm in the U.S. in 2018. Initially, trading off its name as a global platform for traditional assets such as stocks, commodities, and forex. Having operated for years without interference, the SEC’s targeting of broker-dealers resulted in an investigation. As a result, the SEC found that eToro’s crypto trading platform allowed U.S. customers to trade a variety of crypto assets which the SEC considers securities, without properly registering the activity as required under the law.
As well as paying a $1.5 million fine, eToro will offer customers 180 days to liquidate their positions in crypto assets no longer supported on the platform. Customers will receive proceeds from the sale of any untransferable assets within 187 days. The SEC has emphasized that this settlement underscores the need for crypto intermediaries to adhere to the same regulatory standards as traditional securities brokers.
While eToro will continue to offer certain digital assets, the settlement will significantly narrow its offerings, reshaping how U.S. customers can engage with the platform. The company already ditched four cryptocurrencies last year on securities grounds, but this hasn’t been enough to save it.
Not a Win
The settlement serves as the latest effort by the SEC to target such entities under the guise of consumer protection, with Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, stating, “Today’s action demonstrates our continued focus on broker-dealer compliance. eToro, by agreeing to cease unregistered trading of securities, has taken a necessary step to protect U.S. investors.”
This case adds to the growing list of enforcement actions in the crypto space taken by the SEC, leading to concerns that it is building up a portfolio of wins that it can use in its bigger cases against the likes of Ripple and Coinbase. However, crypto lawyer Jake Chervinsky opined in the wake of the ruling that such settlements don’t represent wins:
Remember, settlements aren’t law.
We may see more like eToro from the SEC and other agencies this month, all with orders pretending to establish new precedent.
None do. They’re economic decisions by enforcement targets to flee rather than fight. Fine.
The rest of us fight on.
— Jake Chervinsky (@jchervinsky) September 13, 2024
Despite this, many in the crypto space will be concerned that no entities are choosing to fight over the principle of cryptocurrencies not being securities, deciding that settlements are the easier and cheaper option.
