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This is a great read and not overly long. For a legal filing from the SEC about a cryptocoin marketplace, it doesn’t get much better than this.

The size of the fine strongly indicates (in my totally non-expert opinion) that the SEC was actually deeply grateful to the EtherDelta founder for educating them about how his operation functioned and how this marketplace even worked. I wouldn’t be surprised if he helped write the document we just read.

This is not even a slap on the wrist, this is practically them saying “job well done, sir!”

The point of filing in the first place and ultimately reaching this agreement was clearly a learning experience for the SEC and a practice run for starting to better regulate this new technology.

They learned the ropes with a defendant who didn’t even own the company anymore, and basically hired him to consult for them. The plea lets the SEC put a feather in their hat and try to better establish that they want to regulate even smart-contract based non-custodial trading engines.

Which really kind of sucks because a truly non-custodial smart contract trading engine carries none of the risks that the national exchange regulations were designed to protect against, does it?

Maybe there is still manipulation of the order book that could occur.

And also, which specifically comes up in TFA, the fact that EtherDelta picked which securities were displayed in the book was a key aspect of them being an exchange. If you’re going to, even implicitly, endorse specific tokens, you are going to be subject to these regulations.

It would be great to know specifically how far back you would have to walk from the EtherDelta “line” before the SEC would not pursue enforcement. Is any centralization at all fatal?

I’m going to guess you need a fully decentralize trading book, and users need to explicitly identify the token they want to trade (i.e. by selecting the correct book) before there is no longer an individual person they could target as an exchange.

Basically, I am guessing, you have to get to a point where you aren’t even capable of collecting transaction fees beyond what the miners require to include the transaction in a block.

Overall a very interesting post.

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