The leading altcoin Ethereum (ETH) is again on the agenda with the question of whether it is a security. Most recently, the former member of the US Commodity Futures Trading Commission (CFTC) spoke about this topic. He claimed that the token can be both a commodity and a security. Here are the details…
CFTC commissioner focuses on leading altcoin ETH
Speaking on the May 23 episode of Laura Shin’s Unchained podcast, Dan Berkovitz, who is also the former general counsel of the Securities and Exchange Commission, said it is legally possible for ETH to fall under the jurisdiction of both regulators. The ongoing confusion over the legal status of ETH is largely due to conflicting statements by the CFTC and SEC. As we reported on cryptokoin.com, over the past six months, the CFTC has repeatedly referred to Ether as a commodity.
Meanwhile, the SEC, led by Gary Gensler, has not explicitly provided a specific legal category to ETH. Gensler said at a surveillance hearing in April that anything other than Bitcoin should be considered securities. However, he declined to provide further details. The claim that altcoin ETH can be both a security and a commodity sounds contradictory to many. But Berkovitz pointed to overlapping legal definitions of commodities and securities. He said it is therefore possible for an entity to be classified as both. The former member of the CFTC said the following:
The law is clear. A thing can actually be both a commodity and a security.
Berkovitz: ETH can be both a commodity and a security
Berkovitz noted that the confusion stems from the fact that commodities are not purely physical items such as “wheat” or “oats.” He explained that anything that falls under a “futures contract” can technically be defined as a commodity. This explains why the term “futures” is part of the CFTC. Alternatively, Berkovtiz notes that a security defined by the Securities Act and Exchange Act, which includes things like bonds and investment contracts, may also be the subject of a futures contract. He said that in this case, the CFTC also falls under its jurisdiction.
The main regulatory area of the CFTC covers the regulation of futures and swaps on commodities. But the SEC only regulates securities. However, if something is a commodity in the eyes of the CFTC and a security under the SEC’s definition, it’s entirely possible that both regulatory agencies have jurisdiction over it. In the podcast, Collin Lloyd, a partner at multinational law firm Sullivan & Cromwell, took aim at the SEC’s argument that anything other than Bitcoin should be designated a “security” status under federal securities law.
Lloyd said, “I don’t see anything in case law that says that some string of numbers running on a Blockchain can inherently be a security. It’s a bit of a weird question to ask whether this crypto-asset is a security or not. Is this crypto-asset being sold as part of a securities transaction? you should ask. It depends on the facts and circumstances,” he said. Specifically, Sullivan & Cromwell is currently working on the FTX bankruptcy case. He was hired by Coinbase on April 29 to assist the crypto exchange in its battle for regulation with the SEC.
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