In an unexpected ruling, Judge Martin Glenn dismissed a motion filed on behalf of stakeholders in the Celsius Network bankruptcy case. The tossed out filings were made by investor Otis Davis, who sought the creation of a dedicated legal class to separate investors from employees and customers of the Celsius Network.
Notably, Davis also urged the court to categorize CEL tokens as “not a security”, a designation potentially offering more regulatory breathing room. This request comes in the wake of recent findings in the SEC vs Ripple case where, according to Davis’s assertion, Judge Analisa Torres ruled that XRP was not deemed a security. Interestingly, Judge Glenn declined to comment on the status of the CEL token at all.
However, it’s important to highlight that the ruling in the Ripple case didn’t identify cryptocurrencies as a blanket “security” or “non-security”. Judge Torres commented that programmatic sales on digital asset exchanges were not a security but transactions involving institutional investors fell under the security umbrella.
As anticipated, Davis motion didn’t fare well in court. Judge Glenn dismissed all three of Davis’s proposals swiftly, just eleven days after the motion was presented. Further, the judge explicitly stated that the hearing shouldn’t be construed as an official interpretation of how cryptocurrencies are regarded under securities laws.
As a backdrop to this case, it’s pertinent to mention that the Celsius Network bankruptcy was announced on July 14, 2022. Its former CEO, Alex Mashinsky, was later arrested and charged with fraud. Since this tipping point, Celsius Network has committed to multiple settlements, aimed at providing relief to customers and investor groups. The next round of these settlements is due to be argued in court soon, with a slated hearing in October.
It seems the question of whether cryptocurrencies are to be considered securities is not one that regulators and courts are prepared to answer definitively just yet. This ongoing uncertainty leaves a shadow of confusion, with potential implications for both the scope of regulator involvement and anticipated market growth. But for now, the hint of skepticism remains, raising a question mark on the future of the network and the role of cryptocurrencies within securities laws.