eToro Settles With SEC, Agrees to Cease Most Cryptocurrency Trading for US Customers

By removing tokens offered as investment contracts from its platform, eToro has chosen to come into compliance and operate within our established regulatory framework

eToro Settles With SEC for $1.5M, to Cease Most Crypto Trading for U.S. Customers

Online trading platform eToro has reached a $1.5 million settlement with the U.S. Securities and Exchange Commission over alleged violations of federal securities laws.

As part of the settlement, eToro has also agreed to cease nearly all cryptocurrency trading and transactions for U.S. customers, according to an agreement disclosed by the SEC on Monday.

Moving forward, American users will only be able to trade Bitcoin (BTC), Bitcoin Cash (BCH), and Ethereum (ETH) on the platform. Following an order issued on Sept. 12, the trading venue has 187 days to offboard all other cryptocurrencies and liquidate any existing assets. Customers will receive proceeds equal to their balance.

The SEC’s complaint alleged that eToro operated an unlicensed broker and clearing agency since at least 2020. The exchange failed to register with the regulator or file periodic reports on its financial condition, according to the complaint.

Though the exchange reached a settlement with the SEC, it declined to admit or deny the SEC’s allegations. The agreement allows eToro to continue offering its services in the United States.

“By removing tokens offered as investment contracts from its platform, eToro has chosen to come into compliance and operate within our established regulatory framework,” said Gurbir S. Grewal, director of the SEC’s enforcement division, in a statement. “The $1.5 million penalty reflects eToro’s agreement to cease violating applicable federal securities laws as it continues its U.S. operations.”

The SEC has been ramping up its efforts to regulate the cryptocurrency industry, arguing that many digital assets sold to retail investors are unregistered securities. Several major crypto exchanges, including Coinbase and Kraken, have settled with the regulator over similar allegations.

While the platform refrained from debating the security status of cryptocurrencies, the settlement may be used as a precedent in future cases. Separating BTC, BCH, and ETH from other cryptocurrencies suggests the SEC views most, if not all, other digital assets as securities.

eToro’s past decisions reinforce this view among some service providers. In 2020, when the SEC sued Ripple, eToro delisted XRP and three other cryptocurrencies in response. Still, the company’s crypto services proceeded in other markets. As reported, the firm also bagged a CySEC CASP approval to offer digital asset facilities in all EU countries.

Meanwhile, the SEC and other U.S. regulatory watchdogs continued a sweeping crackdown across the burgeoning blockchain sector. SEC fines against crypto entities have now exceeded $7.4 billion since 2013.

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