Kim Kardashian: SEC Says It Can Keep Up With Crypto Enforcement

Kim Kardashian, eager to be known as a serious businesswoman, should have known better. In 2021, the US TV personality turned lifestyle brand, promoting a cryptocurrency, EthereumMax, on her Instagram page.

Kardashian didn’t notify her followers — more than 200 million at the time — that she was paid $250,000 for the post. On Monday, the influencer paid $1.26 million to settle charges she broke rules by not disclosing the payment she received from EthereumMax.

Given that she was promoting an obscure sign, a typical Instagram follower could probably have guessed that she got something in exchange for the post. Simply adding some fine print would have spared her the ignominy of a Securities and Exchange Commission lawsuit just weeks after founding her private equity firm. As part of the deal with the regulator, Kardashian has not admitted or denied wrongdoing.

The SEC has aggressively expanded its oversight of the cryptocurrency markets. This is part of defending his role as the right cop in the financial services space.

The influence of the SEC on cryptos is not a settled issue. Washington puzzled over which authority should be responsible. This is a critical question given that cryptocurrency prices have largely collapsed since Kardashian’s post.

Based on a 1946 Supreme Court ruling, the SEC uses what is known as the Howey test to determine whether an asset qualifies as an investment contract or security and is therefore subject to federal securities laws. The test is whether an asset involves an investment of money in a common enterprise with the expectation of gains from the efforts of others.

In its order, the SEC argues that EthereumMax’s marketing materials and public statements provide clear evidence that the Howey test was met.

Some cryptocurrency sponsors, notably Ripple Labs, are questioning the authority of the SEC. Some in Congress would prefer the Commodity Futures Trading Commission to take the lead. But the SEC’s success in winning big settlements from the likes of Kardashian improves their chances of gaining dominance.

https://www.ft.com/content/d3fb286f-e894-4889-bd02-252a8bf2b9ec Kim Kardashian: SEC Says It Can Keep Up With Crypto Enforcement

Adam Bradshaw

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