KuCoin, a Seychelles-based cryptocurrency exchange, launched six new trading pairs and expanded its ETF market this week. However, the exchange has faced recent litigation. On 9 March, New York’s Attorney General filed a lawsuit against KuCoin for allowing investors to trade cryptocurrencies on its platform without registration in violation of the Martin Act which prohibits the sales, purchase, and offer of securities and commodities by fraud or misrepresentation. The case is important for defining ETH as a security. KuCoin is accused of falsely representing itself as an exchange and of selling “KuCoin Earn,” which generates passive income on financial products like staking and liquidity mining. The lawsuit seeks an injunction against KuCoin from operating in New York until it complies with the law.
While the exchange was ranked seventh by CoinRanking and added 13 million new users in 2022, it earned flak from Korean and Dutch regulators for operating illegally without proper registration or a license. However, its market share is less than 1%. Although KuCoin’s trajectory has hardly been altered, prospective customers should approach the platform with caution. Kaiko, a web3 data platform, ranked KuCoin 29th out of 37 in its exchange ranking, giving the exchange a B grade overall. Its governance score, which measures an exchange’s policy terms of KYC/AML, market surveillance, country risk, financial regulation, insurance coverage, and other sub-criteria, was lower than all but one of its major competitors – OKX.