SEC May Deem Smart Contract Developers Accountable for “Securities Violation”
In a recent post dubbed, “Statement on Digital Asset Securities Issuance and Trading,” which has since been published by the U.S Securities and Exchange Commission (SEC), an interesting take on smart contracts have been shared, but not so much for smart contract developers.
The SEC starts off by noting the level of reach blockchain technology has attained and the methods needed to manage the overall trading of digital asset securities. The commission describes smart contracts in the following context:
“New technology (such as smart contracts run on blockchain that contain coded protocols to execute the terms of the contract). These technologies provide the means for investors and market participants to find counterparties, discover prices and trade a variety of digital asset securities.”
Following this elaborative description, the Commission also pointed out that said service providers must register as a “national securities exchange,” and this is when EtherDelta gets mentioned quite a lot.
As per the SEC, “EtherDelta […] provided a marketplace for bringing together buyers and sellers for digital asset securities through the combined use of an order book, a website that displayed orders and a smart contract.” This being said, the SEC found the firm’s activities do not abide by the definition and that the firm’s Founder has failed to get the necessary registration.
What is this definition? Here is what the Commission refers to:
“An entity that meets the definition of an exchange must register with the Commission as a national securities exchange or be exempt from registration, such as by operating as an alternative trading system (ATS) in compliance with Regulation ATS.”
News.Bitcoin.com (https://news.bitcoin.com/smart-contract-developers-may-be-held-liable-by-the-sec/) , who also reported on this matter, pointed out that Zachary Coburn was the one who had created EtherDelta’s smart contracts and was prosecuted for what seems like the Founder’s lack of compliance. Many argue that developers should not be held accountable for the code being used just because they created it.
Ultimately, the SEC does not seem to support the argument, as the Commission, “may not make a distinction between the developer of a piece of code and the end user,” – if they manage to trace back to the developer then he or she might be in trouble given a firm violates the aforementioned “definition”.