Ether can simultaneously be a security and commodity under the regulatory scope of the SEC and CFTC, former CFTC commissioner Dan Berkovitz claimed.
Ethereum’s native Ether ETH $1,827 token may be both a commodity and a security, the former commissioner of the United States Commodities Futures Trading Commission has maintained.
Talking on a May 23 episode of Laura Shin’s Unchained podcast, Dan Berkovitz, who's similarly the former general counsel at the Securities and Exchange Commission, spoke that it’s legally possible for ETH to fall under the jurisdiction of both regulatory agencies.
The ongoing confusion over Ether’s legal status stems in large part from discording statements from the CFTC and the SEC. Over the course of the last six months, the CFTC has constantly called Ether, along with a number of different cryptocurrencies, a commodity.
Meanwhile, the Gary Gensler- led SEC hasn’t explicitly provided Ether with a designated legal category. Gensler spoke at an oversight hearing in April that everything but Bitcoin BTC $26,815 should be deemed a security and has disapproved of further evolution.
While the claim that Ether could be simultaneously a security and commodity may strike numerous as a contradiction, Berkovitz spoke that due to the overlapping legal definitions of commodities and securities, it’s possible for an asset to be classified as both.
“The law is clear. Something can actually be both a commodity and a security.”
Berkovitz clarified the confusion arises because commodities aren’t purely physical particulars like “ wheat ” or “ oats ” and that anything that falls under the purview of a “ futures contract ” can technically be defined as a commodity. This explains why the term “ futures ” is a proportion of the name of the CFTC itself.
Alternately, Berkovtiz spoke that security, which is defined by the Securities Act and the Exchange Act — and includes things like notes and investment contracts — can similarly be the subject of a futures contract, which also places it under the purview of the CFTC as well.
The CFTC’s main regulatory purview captures the regulation of futures and swaps on commodities, while the SEC only regulates securities. still, if something is a commodity in the eyes of the CFTC as well as a security under the SEC’s definition, it’s entirely possible for both regulatory bodies to retain jurisdiction over it.
On the podcast, Collin Lloyd, a partner at multinational law enterprise Sullivan & Cromwell, took purpose at the SEC’s claim that everything excluding Bitcoin should be designated a “ security ” status under federal securities law.
“ I don’t see anything in the case law that tells me that some string of digits that operates on a blockchain can natively just be a security, ” told Lloyd.
“It’s kind of a weird question to be asking, ‘Is this digital asset a security or not?’ I think you should be asking, ‘Is this digital asset being sold as part of a securities transaction?’ That depends on the facts and circumstances.”
Notably, Sullivan & Cromwell is presently working on the FTX bankruptcy case and was hired on April 29 to aid the crypto exchange in its battle over an opaque rule with the SEC.
(TOM MITCHELHILL, Cointelegraph, 2023)