What Is the Regulatory Status of Cross-Border Trading of Synthetic Assets That Reference US-listed Securities?

The cross-border trading of synthetic assets that reference US-listed securities is a significant regulatory gray area and high-risk activity. US regulators, particularly the SEC and CFTC, may assert jurisdiction, arguing that the synthetic assets are unregistered securities or illegal swaps, regardless of where the DAO or trader is located.

Trading these derivatives by US persons or from US soil can violate US securities and derivatives laws, leading to enforcement actions against the developers and, potentially, the traders themselves, even if the assets are technically created offshore.