The current most polarizing figure in the crypto community, Aaron Kaplan, said his yet-to-be-launched alternative trading system, Prometheum, would “apply the federal securities laws,” but was vague on how.

In a heated debate on the most recent episode of Unchained, crypto’s current lightning rod, Aaron Kaplan, co-CEO of Prometheum, mocked some interpretations of the law that the crypto community had long held while giving few specifics on Prometheum’s future plans.

The trading platform, the first to obtain a special purpose broker-dealer license to offer trading in digital asset securities, has garnered attention, partially because it’s unclear which tokens, if any, could be categorized as digital asset securities, and partly because of the contemptuous attitude Kaplan has taken toward the rest of the industry.

In response to comments made by his debate partner, Rodrigo Seira, special counsel at Paradigm, a large venture capital firm that is representative of the rest of the industry, Kaplan said, “Basically you’re creating legal concepts in order to serve your purpose. It’s not basically the law.”

Which Tokens Can Prometheum’s ATS Support?

When the two disagreed on whether certain tokens would fall in one of the three main categories that would qualify them as securities, Kaplan scoffed at the idea that tokens sold in a simple agreement for future tokens (SAFT), which has typically been the vehicle for private sales to accredited investors and venture capitalists, were not securities themselves.

“I don’t understand how you could say that something offered in a securities offering is not a security, essentially, it’s like the argument that you have a securities caterpillar transformed into a non securities butterfly,” he said.

Seira retorted with some case law. Referencing the Howey test for whether or not a transaction is a security, which was made based on a famous case involving orange groves, he said, “but no one in their right mind would think that the orange plots were themselves securities. So I think the first step that you’re missing, Aaron, is distinguishing between an investment contract and the ultimate object in the instrument.”

Meanwhile, Kaplan did not go into much detail on how Prometheum would work exactly, beginning with which assets it would list. While in a previous interview on Unchained, he had implied that he viewed ether as a security, which would make it a candidate to be listed on Prometheum, in the latest interview, he demurred.

“We will not support trading in anything that’s an illegal asset,” he said. “We basically will support trading in digital asset securities, which is a determination that’s made by our compliance departments at both Prometheum ATS and Prometheum Capital to make a determination whether a digital asset security exists.” (The ATS, or alternative trading system, will match buyers and sellers, while Prometheum Capital will custody digital asset securities.)

When pressed further on whether it would support trading in ETH, he only said Prometheum was not making any announcements.

Some Breadcrumbs About Prometheum’s Plans

The few details he did give about how Prometheum would work entailed assets that he called Form D tokens. Securities fall into one of three categories: those listed on national securities exchanges, those that have filed a valid exemption with the SEC, and those that are securities under state Blue Sky laws. While crypto lawyers generally say no tokens currently fall in any of these categories, Kaplan asserted that tokens whose issuers had filed form D exemptions would fall in that category.

Seira responded, “I think Aaron is wrong about this,” noting that the actual tokens involved were SAFTs, and that it would be impossible to separate out the particular tokens in the SAFT from those in the rest of the circulating supply.

Additionally, Kaplan stated that Prometheum had the ability to offer trading in tokens simply by updating its Form ATS with the new assets. He claimed that if FINRA didn’t object within 20 days, it was fine to support them.

However, Seira pointed out that many of these assets were ones that Kaplan had said in other venues that he viewed as being illegally issued, and that Prometheum wouldn’t have the power to “cure” what Kaplan views as their illegal status.

One of the main points the Securities and Exchange Commission has made about the importance of registering securities is that the registration process requires the issuer to make disclosures. When asked who should register tokens, Kaplan said Prometheum didn’t have to work with the token issuers and that it could make disclosures for any assets it supports. When pressed on whether the information in its disclosures would be the same as what is included in securities offerings, such as the executives and board, their compensation, etc., — information that often is either nonexistent or not relevant to crypto tokens — he responded that for any irrelevant questions, it would fill in “NA.”

No Love Lost Between Kaplan and the Crypto Community

The two got quite personal. Kaplan went after Seira’s firm Paradigm, which had been investors in the allegedly fraudulent crypto exchange, FTX, which went bankrupt last November.

“It’s interesting how you attack us for choosing the harder route to achieve compliance by actually getting the proper licenses when the ‘shoot first, aim later’ culture that happened led to billions of dollars of public losses,” Kaplan said to Seira. “Essentially your company, Paradigm, has supported some of the entities that were basically so anti-regulation that promoted the biggest, biggest violations, the biggest frauds in American history.”