- 1 Former general counsel at SEC says ETH is both a security and commodity
- 2 The SEC claims everything other than Bitcoin being a security
The United States Futures Trading Commission claimed that ETH, the native token of Ethereum can be claimed as both a security and a commodity.
ETH security or commodity?
Dan Berkovitz, former general counsel at the Securities and Exchange Commission while speaking on Laura Shin’s Unchained podcast on May 23 highlighted that Ethereum can come under the legal jurisdiction of both regulatory agencies.
There has been a lot of confusion surrounding Ethereum whether to call it a commodity or not. There have been conflicting statements from both CFTC and the SEC over Ether’s legal status. The CFTC has stuck to calling Ether and other cryptocurrencies a commodity over the period of the last 6 months.
Meanwhile, the SEC which is currently involved in an elaborated case with Ripple on proving its token as securities have some different views on the ETH issue. Gary Gensel-led SEC has not tried to provide Ether with a designated legal category as of now. In an oversight hearing in April SEC chair, Gensler mentioned that everything other than Bitcoin is a security without elaborating any further.
Berkovitz’s view on ETH being a commodity
Any asset being called a security and commodity can be confusing for some people but Berkovitz has his opinion on this. Berkovitz explained that if there is an overlapping of the legal definition, an asset can be called both a security and a Commodity.
Berkovitz further explained that law is very transparent and that a particular asset can be both a commodity and a security. He explained that the confusion exists since commodities aren’t completely physical like rice or oats but any asset that falls under the radar of a “futures contract” can legally be called a commodity. That is the reason why CTFC itself has “futures” in its name.
Berkovitz also explained that security is basically defined by the Securities and Exchange Act and includes things like notes and investment contracts. He explained that such things also are subject to a futures contract, which indirectly falls under the jurisdiction of CFTC.
The main objective of the CFTC is to monitor the regulations of futures and swaps on commodities while on the other hand, SEC’s main objective is to regulate securities. Berkovits has tried to explain previously that if any asset is also considered a commodity and Security then both CTFC and SEC can have jurisdiction over it.
Collin Lloyd, a partner at multinational law firm Sullivan & Cromwell, on the podcast, took a dig at SEC’s statement of everything else other than Bitcoin is security and that they should be designated so under the law.
Lloyd stated in response saying that he doesn’t see anything under the law that can prove that some random string of digits inside a blockchain can be called a Security.
Lloyd further added that it is very weird to ask a question on whether a digital asset is a security or not, the question that should be rather asked is if it’s part of a Security transaction on not. Lloyd said that all these depend on the facts and circumstances.
On a side note, Sullivan & Cromwell are currently working on the FTX bankruptcy case and helping Coinbase fight with SEC over regulations.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.