Until yesterday, the enforcement actions of the U.S. Securities
and Exchange Commission (SEC) in the digital token (aka
cryptocurrency) space have primarily focused on the primary
issuances of tokens. However, on November 8, 2018, the SEC
announced in an order (the "Order")1 that it had settled charges
against Zachary Coburn, the founder of the digital token exchange
EtherDelta, marking the first time that the SEC has brought an
enforcement action against an online digital token platform for
operating as an unregistered national securities exchange.
Background
According to the Order, EtherDelta operated as an online
platform that allowed buyers and sellers to trade ERC-20 tokens2 — a type of digital token on
the Ethereum blockchain frequently used in initial coin offerings
("ICOs") — in a secondary market. To facilitate
this trading, EtherDelta used a combination of (i) an order book,
(ii) a website "with a user-friendly interface . . . and
resembles online
