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CFTC sues Binance, CZ on alleged unregistered derivatives, crypto assets drop

Yahoo Finance’s David Hollerith joins the Live show to discuss reports that the CFTC has sued Binance and CZ on claims of alleged unregistered derivatives and federal laws violations.

Video Transcript

RACHELLE AKUFFO: Some big moves in the crypto space this hour. The CFTC suing the world's top exchange, Binance, and its founder CZ. And there's a ripple across the sector with Coinbase and Marathon dropping. Yahoo Finance's David Hollerith joins us with the latest. Hey, David.

DAVID HOLLERITH: Rachelle, so this has been filed in a federal court in Chicago. And it's the CFTC against Binance, which is unusual in that we usually see these lawsuits come from the SEC. The SEC has made increasing effort to regulate the sector.

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In the CFTC complaint, it has accused Binance and its founders CZ of-- excuse me, of incorrectly shirking obligations to properly register with the agency. And in particular, they named Bitcoin, Ether, and Litecoin as commodities, which is obviously interesting as we've seen in this dialogue that regulators don't always coalesce in what they say. And the SEC has said more or less that everything except Bitcoin could be a security.

So potentially, obviously, not good to see the largest cryptocurrency exchange filed a lawsuit. But there's been a lot of talk about this ongoing about Binance's relationship to US customers. It's not supposed to operate in the US. But then this silver lining where the crypto sector could actually see more regulatory clarity from something like this. So interesting lawsuit. We're still digging into it.

RACHELLE AKUFFO: And certainly, after we saw the fall of FTX, a lot of eyes looking at Binance wondering what else was going on there. So in terms of what this means for the broader industry, how much of this is Binance-specific versus industry-wide?

DAVID HOLLERITH: Yeah. That's a good point. It's definitely Binance-specific in how it'll affect their customers in their transaction flows. The complaint also points out that they've exaggerated transaction volume. And Binance, for the past year, has talked about wanting to settle with US regulators on a number of fronts.

So it's not good for the company. But, again, I think that we could see more clarity in terms of regulation for the sector just in terms of which crypto assets are deemed securities and commodities. And that has been the big thing.

RACHELLE AKUFFO: Certainly, be keeping an eye on that and what happens with the price of crypto as well. David Hollerith, thank you so much.