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A Connecticut federal jury just answered one of the biggest
questions on the minds of cryptocurrency investors, developers, and
regulators – are cryptocurrencies securities? The jury concluded
that Paycoin and several cryptocurrency mining-related assets are
not securities.

This is an important verdict because it is the first time a
federal jury has considered whether a cryptocurrency is a security,
as the SEC has posited. Significantly, the verdict follows parallel
SEC and DOJ actions that reached the opposite conclusion with
respect to the same digital assets. The DOJ had successfully
prosecuted Homero Joshua Garza (“Garza”), the founder of
Paycoin and the crypto currency mining operation at issue, under
the theory that the products offered were securities.
Garza plead guilty in 2017 and was sentenced to 21 months in prison
and ordered to pay $9,182,000 in restitution.

It is not surprising that a jury arrived at the opposite
conclusion given years of confusion among laypersons, investors and
regulators concerning how to classify and regulate
cryptocurrencies. For example, as recent as August 2021, SEC Chair Gary Gensler remarked that
cryptocurrency was the “Wild West” and that many tokens
are offered and sold as securities. But at the same time,
the Commodities Futures Trading Commission (CFTC) (Gensler’s
former employer)

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