104 Iowa L. Rev. Online 120 (2020)
Abstract
The absence of any clear guidance on when a digital asset is a security is a problem that has ramifications far beyond this article’s limited focus on our insider trading enforcement regime. Nevertheless, I have argued that the impending application of our insider trading laws to crypto-assets helps to illustrate why it is unfair and unjust to force market participants to wait much longer for a definitive answer to the question of when a digital asset is a security.
It may be that crypto-assets are too hard to shoehorn into any existing categories and should be recognized as comprised by a whole new asset class, and regulated by an entirely new statutory or self-regulatory authority. Alternatively, existing authorities, such as the SEC, CFTC, and IRS could issue clear rule-based guidance on when a crypto-asset is a security or commodity, and how it should be taxed. For example, the Swiss financial regulator, FINMA, recently issued guidance on when digital assets are securities.
In any event, as jurists, regulators, and legislators struggle to propose reforms that will bring greater clarity and precision to our insider trading enforcement regime, its members should not ignore the issues introduced by the emergence of trading in crypto-assets. While I have argued that crypto-assets create new ambiguities for an already vague body of law, I have also suggested that viewing our insider trading regime through the fresh lens of crypto-assets may also help to bring some resolution to debates (e.g., over the scope of misappropriation liability) that have persisted for decades.