ADA's classification as a security: SEC got it wrong, says legal expert

ADA, the native cryptocurrency of Cardano, is now among a list of 61 cryptos classified as securities. A legal expert believes that the reasons behind this SEC classification don’t hold up. Here’s his analysis.

Is the SEC’s case against Cardano weak?

Are the SEC’s accusations that ADA is a security legitimate and well-founded? Legal expert Bill Morgan doesn’t think so. In a recent tweet, the specialist provides his analysis of the situation and the arguments supporting it.

His arguments are based on an analogy with the development of the smartphone market. This particular technological sector has the characteristic that its operators provide information about the features of their products.

When they do so, Morgan explains, it is essentially to introduce improvements. It’s a way for them to remain not only competitive but, more importantly, to stimulate sales and revenue.

This practice also exists in the crypto industry. But the SEC, he notes, seems to treat the efforts of crypto firms like Cardano to remain profitable and competitive differently. Doesn’t this suggest a double standard for a public institution supposed to be fair in its treatment?

The SEC seems to rely on publicly available information shared by Cardano and its stakeholders, Input Output (IOHK) and Emurgo. According to the SEC, the information in question led users to believe that they were investing in these entities, with the aim of benefiting from development efforts and an increase in value.

For Bill Morgan, what seems like an investment appeal is nothing more than adding features to Cardano. Consequently, its leader, Charles Hoskinson, can be confident. The SEC’s argument would not hold up in court.

It is worth noting that the SEC itself has not been able to definitively determine what a security really is. But that is another topic altogether.