Cryptocurrency exchange ShapeShift has reached a settlement agreement with the United States Securities and Exchange Commission (SEC), accepting the agency’s cease and desist order and agreeing to pay a penalty. The exchange had ceased its operations in 2021 when it transformed into a decentralized autonomous organization (DAO).
According to the SEC’s allegations, ShapeShift operated an online platform resembling a crypto “vending machine” from 2014 until January 2021. Acting as the “market maker” and counterparty for trades, ShapeShift was able to generate revenue from the price difference on these transactions. The SEC’s order states that ShapeShift was incorporated in Switzerland and headquartered in Colorado for several years, offering at least 79 assets at its peak. Some of these assets were classified as securities under the Securities Exchange Act of 1934 and the Howey test. As a result, ShapeShift has agreed to pay a penalty of $275,000.
The SEC order noted that “ShapeShift does not currently have any revenue or full-time employees.” In July 2021, ShapeShift dissolved its corporate entity and simultaneously made its operations open-sourced and decentralized.
In November 2019, ShapeShift introduced the FOX token, which allowed users holding FOX to trade without fees. In 2021, ShapeShift transformed FOX into a governance token and announced plans for the largest airdrop in history.
ShapeShift briefly acknowledged the regulatory pressure it faced. Founder Erik Vorhees mentioned in a blog post that the regulatory landscape had evolved.
Despite the dissolution of its exchange, ShapeShift DAO continues to operate under the same web address, and the FOX token remains tradable. The peak price of FOX reached $1.68 in March 2021, and it currently trades at $0.09 with a market cap of $38.9 million.
SEC commissioners Hester Peirce and Mark Uyeda issued a joint statement on the ShapeShift settlement. They created a hypothetical dialogue between Future ShapeShift and the SEC to highlight the ambiguity of the SEC’s regulatory stance, which they deemed untenable.