Online trading platform eToro USA LLC has agreed to pay a $1.5 million penalty to the U.S. Securities and Exchange Commission (SEC) over charges of operating as an unregistered broker and clearing agency.
The SEC’s enforcement action emphasizes the need for crypto platforms to comply with federal securities laws as it continues to regulate the growing digital asset industry.
The settlement follows an SEC investigation revealing that eToro allowed U.S. customers to trade a variety of crypto assets deemed securities without registering with the SEC.
Since at least 2020, eToro has enabled its users to trade cryptocurrencies on its platform, but it did not meet the registration requirements necessary to legally operate as a broker in the U.S. market.
As part of the settlement, eToro will significantly scale back its crypto offerings in the U.S. Starting now, the platform will limit trading to only three cryptocurrencies: Bitcoin, Bitcoin Cash, and Ether.
Users will have 180 days to sell any other crypto assets currently available on the platform. If customers do not liquidate these assets within this period, any remaining holdings classified as securities will be liquidated by eToro, and proceeds will be returned to the customers within 187 days.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, stressed that this settlement serves as a warning to other crypto platforms. He emphasized that intermediaries in the cryptocurrency space must adhere to federal securities laws to protect investors.
The SEC’s investigation into eToro, led by a team including Jon Daniels, Alison Levine, and Tiantong Wen, demonstrates the agency’s commitment to overseeing crypto market practices.
eToro did not admit to or deny the SEC’s findings but agreed to comply with the cease-and-desist order.
The company’s acceptance of the penalty and the restriction on its U.S. trading offerings highlights the increasing scrutiny faced by cryptocurrency platforms and their need to align with evolving regulatory standards.
