![]() The SEC provided no guidance, however, about which digital assets it deemed to be securities, suggesting that it will continue to take a cautious approach to classifying particular digital assets.The cease-and-desist order only covered the period from the publication of the DAO Report until the company was sold in November 2019, even though Poloniex began operating in 2014. In its July 2017 DAO Report, the SEC warned that offers and sales of digital assets are subject to federal securities laws and stated that “any entity or person engaging in the activities of an exchange must register as a national securities exchange or operate pursuant to an exemption from such registration” such as the exemption for alternative trading systems. The action highlights the SEC’s heightened focus on and prioritization of regulating digital asset products and emerging industry players that the agency believes may not have abided by certain requirements of the federal securities laws.Without admitting or denying the SEC’s findings, Poloniex agreed to the entry of the order and a payment of $10,388,309 in disgorgement, prejudgment interest, and a civil penalty. However, the SEC did not identify what digital asset(s) it determined were securities nor why, simply stating that Poloniex facilitated trading of “digital assets that were investment contracts and therefore securities.” ![]() In the cease-and-desist order, the SEC alleged that Poloniex met the definition of an “exchange” because it “provided the non-discretionary means for trade orders to interact and execute through the combined use of the Poloniex website, an order book, and the Poloniex trading engine.” The SEC also found, based on internal communications, that Poloniex decided to be “aggressive,” ultimately listing token(s) it had internally determined carried a “medium” risk of being considered securities under the Securities Act of 1933 pursuant to the test set forth by the U.S. for allegedly operating an unregistered exchange in violation of Section 5 of the Exchange Act in connection with its operation of a trading platform that facilitated the buying and selling of digital asset securities. Spends her free time reading, cooking, and exploring the great outdoors.On August 9, 2021, the SEC issued a cease-and-desist order against digital asset exchange Poloniex, Inc. Spends her free time reading, cooking, and exploring the great outdoors. ![]() Mary has a liberal arts degree from Goddard College and In a rational basis review, it’s the individual or organization bringing the challenge that must supply proof that the government violated the equal protection clause.Įver since she began contributing to the site several years ago, Mary has embraced theĮxciting challenge of being a MyLawQuestions researcher and writer. This is in contrast to rational basis reviews, the lowest level of scrutiny used. The government also has a similar burden of proof in cases subject to strict scrutiny, the highest level of scrutiny applied. It’s not the responsibility of the plaintiff to prove that laws violate constitutional rights, but instead the responsibility of the government to successfully defend challenges made against controversial laws. In cases of heightened or intermediate scrutiny, the burden of proof rests with the government. In some cases, heightened scrutiny is also applied to discriminatory statutes and policies on the part of government agencies, such as the military. Even executive orders signed by the president can be taken to court. Challenges can be made to laws passed by Congress, state legislatures and the federal government. Heightened scrutiny applies to lawsuits against the government. Usually, First Amendment cases require strict scrutiny, but when regulations are broader in scope and involve guidelines for entire industries, heightened scrutiny may be sufficient. Sometimes, this type of scrutiny is applied to cases involving the First Amendment. If a state law offered public education for all children, except those born out of wedlock, it would be a form of discrimination subject to heightened scrutiny. These are also known as illegitimacy cases. ![]() Intermediate scrutiny is also used for cases involving children born outside of marriage. Supreme Court has not applied heightened scrutiny to any laws regarding sexual orientation, however. Circuit Court of Appeals found the practice unconstitutional and applied the standard of heightened scrutiny to the case. One example was a law that allowed prosecutors to remove jurors from a case solely based on sexual orientation. Not all federal appeals courts or state courts apply this level of scrutiny to sexual orientation cases, but many do. A different but similar situation involves sexual orientation, such as being gay or lesbian.
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