Poloniex, a top-15 cryptocurrency exchange by trading volume, recently began offering users the option to trade the two planned Bitcoin Cash (BCH) protocols pre-fork: Bitcoin Cash ABC (BCHABC) and Bitcoin Cash SV (BCHSV).

Since trading began, Craig Wright’s BCHSV has significantly underperformed Amaury Séchet’s BCHABC, suggesting the market is currently betting on the latter to succeed. Predictably, not everyone is pleased by the pre-fork trading. Wright has taken to Twitter to rebuke Poloniex for offering naked shorts, suggesting the subsidiary of Circle is committing a crime in the United States.

According to the U.S. Securities and Exchange Commission (SEC), in a “naked” short sale, “the seller does not borrow or arrange to borrow the securities in time to make delivery to the buyer within the standard three-day settlement period.” The SEC banned the practice of naked short selling in the United States in 2008 after the financial crisis.

In this particular case, since Poloniex is offering a tradeable asset that does not technically exist (pre-fork) and is not readily available, Wright’s argument could have some merit.

However, the SEC does note that select cases of market makers needing to leverage naked trading to keep up with demand are allowable under current regulations.

“Because it may take a market maker considerable time to purchase or arrange to borrow the security, a market maker engaged in bona fide market making, particularly in a fast-moving market, may need to sell the security short without having arranged to borrow shares.”

It is questionable whether these exemptions would apply to an asset created for the sole purpose of naked trading. Poloniex’s pre-fork trading is available for the following pairs: BCHSV/USDC, BCHABC/USDC, BCHSV/BTC and BCHABC/BTC.

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