FTX's FTT token labeled a security in SEC complaint

The U.S. Securities and Exchange Commission labelled FTX's exchange token, FTT, as a security — putting other exchange tokens in the spotlight.

"If demand for trading on the FTX platform increased, demand for the FTT token could increase, such that any price increase in FTT would benefit holders of FTT equally and in direct proportion to their FTT holdings," the SEC wrote in a complaint filed Wednesday against FTX co-founder Gary Wang and Caroline Ellison, the former CEO of sister trading firm Alameda Research.

The U.S. securities regulator added: "The large allocation of tokens to FTX incentivized the FTX management team to take steps to attract more users onto the trading platform and, therefore, increase demand for, and increase the trading price of, the FTT token."

The complaint specifically noted that FTX used proceeds from the FTT token sale to fund its business efforts. It also emphasized that the exchange token was an "investment" in its language. "The FTT materials made clear that FTX’s core management team’s efforts would drive the growth and ultimate success of FTX," the complaint states.

Rival tokens

The SEC's stance throws a shadow over similar tokens issued by rival crypto exchanges. The regulator takes particular issue with FTX's buyback-and-burn practice — something other centralized exchanges, such as Binance and OKX, do with their exchange tokens, akin to stock buybacks in traditional markets.

Even so, the prices for exchange tokens haven't reacted negatively to the news. The largest, Binance's BNB, has been trading flat over the past 24 hours, according to CoinGecko. OKX's OKB, on the other hand, is up nearly 2%. Crypto.com's cronos is up less than 1%, and Huobi's HT is up 1.5%. The price of KuCoin's KCS remains flat.