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) issued…

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