Exodus’s NYSE Uplisting Axed by SEC at Eleventh Hour – What You Should Know?

The popular cryptocurrency wallet Exodus is not getting listed on NYSE American as planned.

To provide some background on the events leading up to this day, let”s revisit earlier this week. Exodus Movement (OTCQX: EXOD), the software developer behind the Exodus Wallet, announced that its stock had been approved for listing on the NYSE American Stock Exchange, which focuses on small-cap stocks, under the ticker “EXOD.” This uplisting from over-the-counter (OTC) trading was to happen on May 9.

The company said at the time:

“Uplisting to the NYSE American marks a significant milestone in our journey that will allow Exodus to create greater long-term value for our stockholders by increasing our presence within the investor community and, in turn, increase liquidity.”

In a post on X (previously Twitter), the self-custodial crypto software platform shared excitement about getting listed on the NYSE, noting “the lack of liquidity in OTC markets” has impacted Exodus’ stock price despite its strong financial position.

“Time to level up,” read the post. “The NYSE listing provides a more efficient market with more equitable price discovery, benefitting our investors and Exodus’ long-term growth.”

However, the company’s plan to broaden the awareness of Exodus has been quashed by the US Securities and Exchange Commission (SEC). 

In its press release, Exodus noted that it has been informed by the ICE-owned NYSE, formerly known as the American Stock Exchange (AMEX), that the listing has been delayed. The NYSE American further revealed that it is due to the securities regulator still reviewing the company’s registration statement. 

Exodus co-founder and CEO JP Richardson said the company was “surprised and confused by this last-minute decision.” In its official statement, the company noted that it was previously informed by the NYSE American that its shares of Class A common stock, par value $0.000001, had already been approved for listing. But for now, the company’s Class A Common Stock will continue to trade on OTCQX.

However, Exodus remains “hopeful that the SEC will follow through on its commitment to treat us as the law intends” and expects a “swift resolution in this matter.”

Exodus said that once the agency completes its review of the registration statement, it “may reconsider listing on a national securities exchange at a future date.”

Exodus first became a publicly traded company during the bull market of 2021 when it listed its stock with broker-dealer tZero. At the peak of the previous bull run, in April 2021, Exodus raised $60 million in a matter of five days after it received approval for the third-ever Regulation A token offering.

During the sale of its common stock at $27.43 per piece, which was approved by the SEC, more than 4000 people committed. A vast majority of these (92%) were non-accredited investors. Exodus only accepted BTC, ETH, and USDC in exchange for its common shares. 

Besides being the first to launch the ‘first-ever Reg A+ common stock offering with crypto-only purchases,’ ExodusExodus’s common stock is also tokenized on the Algorand blockchain, making it the only public company in the US to have that. 

Tokenizing the EXOD stock is “phenomenal from a usability standpoint,“ Richardson said in an interview with a media outlet. Not only does this make it easier and faster for investors to trade the stock, but dividend payouts can even be made in stablecoin on the blockchain, he added.

Click here to learn all about investing in Exodus tokens. 

Crypto & Exodus Gain Traction 

Founded in 2015, Exodus is a multi-asset software wallet that is available on desktop, mobile, and browsers. The company’s mission is “to help the world exit the traditional finance system.“ To ensure privacy, security, and complete control over funds, the wallet provides self-custodial functionality that is encrypted locally on users’ own devices.

On Google Play, the popular crypto wallet app has achieved 1 million plus downloads and has a 4.5 rating. Meanwhile, on the App Store, it has a rating of 4.6 stars and a ranking of 68 in Finance.

The wallet allows its users to send and receive crypto across 50+ networks and manage Bitcoin, Ethereum, Solana, NFTs, and custom tokens. The wallet app further offers price alerts, real-time price charts, and more features.

The Exodus Web3 wallet Chrome extension has 100,000 users who can purchase crypto with a credit/debit card, bank account, Apple Pay, or Google Pay, swap crypto, withdraw funds to a bank account, stake to earn passive income and explore DeFi and NFTs.

With the crypto market back in action, the wallet has been getting a lot of traction and reporting strong momentum. For its unaudited quarter-first 2024 results, the company reported a record revenue of $29.1 million, up 118% from Q1 last year, and a net income of $54.8 mln.

During this quarter, the wallet processed $1.35 bln in volume, up 102% from 1Q23. Monthly funded users surpassed 1 million, while monthly active users were just over 1.69 million, both up more than 30% from Q1 2023. It further reported digital assets (BTC and ETH) and cash at $206.9 million.

At the end of February, the company also announced its fiscal 2023 results: $2.66 billion in exchange volume and $138.3 million in crypto and cash.

Richardson, during that time, said:

“The demand for cryptocurrency continues to grow at a rapid rate as indicated by the appreciation of Bitcoin in Q1 and the growing users on our platform.”

He further added:

“We believe our technological innovation, coupled with our healthy financial profile, strongly positions us for a wealth of future opportunities ahead.”

Despite its solid numbers and financial position and years of working with the New York Stock Exchange (NYSE) on the listing, Exodus’ stocks have been delayed from being traded on NYSE America due to the SEC’s unfriendly approach to crypto. 

SEC Hellbent on Destroying Crypto?

The development concerning Exodus (EXOD) listing comes as US regulators tighten the noose around crypto companies. As regulators step up enforcement actions against both the projects and developers, the crackdown is targeting self-custodial cryptocurrency wallet providers for facilitating illicit activities such as money laundering. 

As a result, most recently, zkSNACKs’ Wasabi Wallet and ACINQ’s Phoenix Wallet announced that they would no longer be offering their services to US customers. Both the wallet providers expressed concerns about the government classifying self-custodial wallet providers as legitimate money service businesses after the regulators took action against Metamask creator Consensys and crypto mixer Samourai Wallet.

ACINQ, in a post on X, said:

“Recent announcements from US authorities cast doubt on whether self-custodial wallet providers, Lightning service providers, or even Lightning nodes could be considered Money Services Businesses and be regulated as such.“ 

Last month, the US Department of Justice, along with other agencies, brought money laundering charges against Samourai Wallet co-founders CEO Keonne Rodriguez and CTO William Hill, who have been arrested. The DOJ had also charged the Tornado Cash developers on similar grounds, accusing them of laundering more than $1 bln in criminal proceeds.

Amidst this, the FBI cautioned Americans against using unregistered money-transmitting service providers unless they are registered as Money Services Businesses (MSB). The FBI said that those who use such platforms “may encounter financial disruptions during law enforcement actions, especially if their cryptocurrency is intermingled with funds obtained through illegal means.”

The SEC has also sent a Wells notice to Consensys, accusing it of acting as an unlicensed broker-dealer and warning it of potential enforcement actions related to its MetaMask Swaps and MetaMask Staking products.

In response, Consensys has filed a lawsuit against the agency for overextending its authority and trying to “seize control over the future of cryptocurrency.”

The complaint further discusses the SEC’s seeking to regulate ETH as a security even though the crypto asset “bears none of the attributes of a security.” The regulator has already told the world that “ETH is not a security, and not within the SEC’s statutory jurisdiction.”

Consensys, as per its complaint, is looking to clarify that ETH is a commodity and Metamask is not a broker and to get an injunction to leave developers alone.

Ethereum co-founder and Consensys CEO and founder Joe Lubin said their pushback against the regulator “is intended to preserve access for the thousands of developers, market participants, and institutions who have a stake in“ Ethereum.

Speaking recently at a crypto summit in London, Lubin called the SEC’s “strategic“ enforcement actions an attempt to create FUD, “paralyze,“ and force the company offshore instead of going with “open discourse and clear rulemaking.”

Regarding Wells Notice against Metamask as wand Uniswap, JPMorgan noted in a report that this “makes it clear that decentralized platforms are not exempted from the SEC’s objective to eventually supervise most of the crypto industry.“

But this is not all; the SEC has even issued a Well’s Notice to the retail trading platform Robinhood (HOOD), which is a preliminary warning about potential enforcement action for allowing the trading of thirteen tokens besides BTC and ETH.

“We firmly believe that the assets listed on our platform are not securities, and we look forward to engaging with the SEC to make clear just how weak any case against Robinhood Crypto would be.“

– Dan Gallagher, the former SEC Commissioner and Robinhood’s chief legal officer

Last year, Robinhood removed Solana (SOL), Polygon (MATIC), and Cardano (ADA) from its platform, a move that came just days after the SEC’s crackdown against the industry’s biggest exchanges.

Given that the highly regulated company applies the “same legal and compliance standards“ to crypto as its brokerage and has already been “very conservative“ in services offered, CFO Jason Warnick said:

“It’s disappointing to see more regulation by enforcement.”

While facing SEC scrutiny, the company reported a 224% increase in its crypto trading volume in 1Q24, which was $36 billion. Crypto-related revenue jumped 232% from the previous year to $126 mln, and overall transaction-based revenue was $329 million. As of March 31, Robinhood had $26.2 billion in user-user custody.

In an X post on Tuesday, Vlad Tenev, Robinhood CEO, noted:

“If necessary, we will use our resources to contest this matter in the courts.”

While this has been going on, this week, the US House of Representatives voted to approve a resolution rejecting the SEC’s crypto accounting guidance that deters banks from handling crypto customers. However, President Joe Biden promised to veto the effort if it came to his desk, as the rule was established due to “technological, legal, and regulatory risks that have caused substantial losses to consumers.“

What’s Ahead for Exodus?

As we have seen, the US government has a clear agenda against the crypto industry. In addition to all the names mentioned above, the regulatory agencies have also gone after Ripple and several major crypto exchanges, including Binance, Coinbase, Kraken, and KuCoin, for allegedly violating US securities laws. 

Many of these companies are fighting back, with the SEC’s lawsuit against Ripple helping clarify crypto asset securities. Coinbase has been spending a lot of its resources fighting the case in court, while Kraken and Uniswap have also vowed to fight back. Amidst this, the Blockchain Association has sued the SEC over its definition of “broker.“ 

Exodus seems to be the SEC’s latest target. But despite the ongoing regulatory crackdown, Exodus’s US CEO is optimistic about the future of crypto, especially the future of publicly traded digital assets, and believes that eventually, additional stocks will be powered by the blockchain.

For now, Exodus, which is already regulated as a public company with robust reporting obligations, will continue to cater to its 4.5 million customers, “operate as a public company,“ and work with the SEC on its NYSE listing. Still, Exodus is “considering all of our options,“ with Richardson noting, “Nothing is off the table.”

Click here to learn all about buying Exodus tokens (EXOD).