There's no doubt EtherDelta's system addressed many of the reasons traditional markets required regulation but EtherDelta is still a clear violation of the Exchange Act. All securities exchanges must be registered, most tokens are securities and EtherDelta was running an unregistered exchange selling those securities.

That being said, this is a classic example of the law failing to keep pace with technology. Up until a few years ago it was a given that exchanges required a neutral third party to facilitate transactions and that, in the interest of fairness and full disclosure, those market makers needed to be registered and regulated. The law simply does not contemplate a self-regulated exchange governed by smart contracts and a decentralized ledger.

U.S. regulators also tend to focus on compliance with black-letter law without giving much credence to compliance with the spirit of the law. In my opinion, this all-or-nothing approach stymies innovation because regulators and innovators become adversaries when they could and should be allies.

Yes, I'm also having a hard time understanding why is this illegal.

ICOs are mostly illegal unregistered securities so any service that trades those tokens is also illegal.

I'm not talking about ICOs. In fact, EtherDelta was one of the few projects that launched without an ICO, and before the ICO craze.

EtherDelta allows you to trade illegal securities, therefore EtherDelta is also illegal.

It allowed you to trade any ERC-20 token, indiscriminately. If you point an ERC-20 contract address to it, it would add it automatically to the user interface.

Also, I'm not talking about if it's illegal or not, the point that I can't get over is that the ED guy didn't scam or hurt anyone. It was an honest, transparent, open source project.

there are several issues at play: rules around trading securities and securities fraud. EtherDelta broke certain rules and that/s why the founder got fined about 400k in total. You are correct that EtherDelta wasn't a fraud or a scam - and that's why there is no criminal proceeding, no accusation of securities fraud.

the SEC doesn't give a shit.

if it quacks like a duck, looks like a duck, it's probably one in their eyes.

Coburn never would have settled if the SEC were that sloppy. You might disagree with the laws involved, but I'm pretty sure they had a decent legal case.

he's not in the clear from civil lawsuits which I'm sure this SEC settlement sets a precedent.

ICOs are securities so must be registered with the SEC.

Exchanges that trade securities must also be registered.

You can trade ICOs on an exchange as long as both are registered according to their respective laws...